No one likes to think about getting a divorce. What’s more, divorce for business owners can mean the dissolution of your livelihood without the proper safeguards in place. If you’re a business owner, taking precautions to protect your business during a divorce is important. Here are five steps you should take as soon as possible.
1. Refer to Your Prenuptial or Postnuptial Agreement
Hopefully, you had the foresight to draft a prenuptial agreement or postnuptial agreement early in your marriage. If you did plan an agreement for wealth dispersal then hopefully it speaks to your rights to retain your business in the event of a separation or a divorce.
If you have a prenuptial or postnuptial agreement, protecting your business should be straightforward. If you don’t, however, there are still things that you can do to retain the rights to your company.
2. Create a Business Operating Agreement
A business operating agreement describes how to value one partner’s share of the company in the event of a sale.
An operating agreement can dictate what happens in the following cases.
- Death of a business partner/spouse
This legal document can help protect business owners who are married, but whose ex-doesn't participate in the enterprise’s operations on a day-to-day business.
3. Put Your Business in a Trust
When you put your business in a trust, you’re no longer the owner of the company, the trust is. When assets are in a trust, they cannot be divided because they’re no longer considered marital property. Even when you are business partners, you can’t trust your spouse to look out for you. Confer with a divorce lawyer or financial advisor to protect your assets.
4. Appraise Your Business
Appraise a joint business as soon as you’re married so that any value of the enterprise prior to marriage is protected in a divorce. However, if you didn’t do this, it’s okay, get your business appraised once the divorce is on the table.
The appraisal by a third party will give you a good idea of how much your business is worth, providing you with a more informed bargaining chip. If your company is considered community property and is up for the division, you can hopefully offer up something else (like the house) in exchange for the enterprise.
5. Hire an Attorney
Because dividing a business during divorce is complicated, you need a lawyer on your side who will commit to working for you. The Law Offices of Molly B. Kenny will do everything to help protect your business during a divorce. Contact us via online form or phone 425-460-0550 today.