Imagine spending years building up a successful consulting business. You have spent countless hours, from the time you started your company until now, ensuring its profitability. You sacrificed other business opportunities, as well as time with your friends and family, to make your dream come true. Now, imagine all you worked for hanging by a thread, its continuation dependent of the outcome of your divorce.
Is there more you could have done to protect your business from divorce? While it may be impossible to shield your assets 100 percent from the outcome of a contentious divorce, there are steps you can take to protect your business. An attorney in the Newport Beach area can advise you on how best to protect our high value assets. Read further for tips to guard your business during a divorce.
1. Marital agreements
Marital agreements generally come in two forms: prenuptial and postnuptial contracts. Couples sign prenuptial agreements prior to taking vows. Such agreements usually include details about how the pair will divide property or handle spousal support in case of divorce. A postnuptial agreement is much like a prenup except that a couple can enter into it after becoming married. Unfortunately, postnuptial contracts receive more scrutiny and challenges in court.
For the most part, pre-marital agreements take precedence over a state's property division laws. However, in order to be valid, marital agreements should include certain elements. First, the agreement has to be a written document. Both parties must voluntarily enter into the contract without any duress. Each person must fully disclose all assets. The agreement must also be fair.
2. Choose the right entity
The entity you choose for your business can also provide protections for your business. For example, if your business is an S-Corporation, you can have certain shareholder agreements in place to guarantee the continuation of the company. The agreement can ban shareholders from transferring shares to other people without the approval of the other shareholders.
3. Pay yourself what you're worth
Instead of reinvesting all of the company's earnings back into the business, pay yourself a competitive wage. By paying yourself a wage, you have not deprived your wife of any earnings from your company while you were married.
4. Don't hire your spouse
Keeping your wife separate from the business could stop her from claiming a large percentage of the company when you divorce. If your spouse takes an active role in the company and spends a large quantity of time helping you manage it, she could be entitled to large part of past, current and future earnings.
If you are facing a complex divorce, it is important to take steps to protect your assets. An experienced divorce lawyer can help you ensure your business continues after your divorce