Once you and your spouse have decided it’s time to get a divorce, the work of separating assets begins. The first step is discovering which assets are considered marital property and which are personal property. What happens, however, if you have a business at the time of your divorce? Does it get divided as well?
If you are the in the midst of a divorce and wonder what will happen to your business, know that you can take steps to protect it. In fact, protecting your business in the middle of a divorce can begin before you even marry.
Create a Prenuptial or Postnuptial Agreement
If you have already started your business and you are about to get married, consider creating a prenuptial agreement. This will state what each person is entitled to property-wise should the marriage ever dissolve. A prenuptial agreement can include alimony and any assets, including businesses, that were already in operation before the marriage.
If you didn’t have a prenuptial agreement made before you were married, you could have a postnuptial agreement made. In order to be considered fair, both parties must agree to all parts of the agreement, including shared property and any business assets.
Have Your Spouse Sign a Confidentiality Agreement
If your business manufactures a product or has secret recipes for your items, then you most likely have your employees sign a confidentiality agreement. The same can be true for your spouse. If they didn’t help you open the business but they do work for the business in some capacity, they are most likely privy to those secrets.
It’s best to have them sign a confidentiality agreement before you notice signs of trouble in the marriage, but you can have them sign one when you separate as well. This means they can’t go to a competitor or anyone else outside of the company and tell them your manufacturing process or any other confidential information.
Along the same lines, you could have your lawyer make a protective order so that your spouse may not give any information about the company to anyone outside of it.
Prove Your Spouse Wasn’t Involved in Your Business
If your spouse was never involved with your company either in the beginning or throughout your marriage, you can prove that they weren’t involved in any way and aren’t entitled to half of it.
This means that you kept your business records apart from your home, you kept all financial records separate and away from the house, and you ensured that your spouse didn’t have access to any of the business accounts.
You could opt to get insurance to protect the business against a potential divorce or separation of assets. Ask your insurance provider to suggest what the best options are for you.
Be Willing to Give Up Assets
You might have to be willing to give up other assets in order to keep control of your business and not divide it. This means that you need to be willing to negotiate other property of at least equal value, which could include the marital home, any vehicles, income property, cash, or stocks.
In order to do this fairly, make sure you have a valuation done on your business so you know exactly how much it is worth. If your other joint assets don’t add up to the total value of the business, you could offer a payment plan over time for the difference.
You could also buy your spouse out of the business. You could make payments over time to your spouse, or you could sell a stake in the company to a partner or employees to help raise the funds to buy out your spouse.
If you need more information on protecting your business during a divorce, contact us at The Law Offices of Thomas Marola for a consultation.