Protecting the business from a divorce

California couples are familiar with the concept of a family-owned business. Often, couples who own a business together work together to operate the business or perhaps one spouse does the work while the other provides investment funds. Often, couples who work together have long marriages and business partnerships.

The American Psychological Association recently stated that 40 to 50 percent of married couples in the United States are now divorced. When married business partners divorce, the business itself becomes a marital asset to be divided and the business then becomes part of the legal issues and process.

However, different ways allow business-minded spouses to protect a business from the ravages of divorce. For starters, a couple can draft a prenuptial agreement with a family law attorney prior to marriage. The special agreement can clearly identify the business as a separate property, if the business was in force before marriage or designate how it would be divided in the event of divorce.

A separate property is exempt from marital asset division and properties. The marital contract should be in writing, strictly voluntary and both parties must fully disclose all assets and liabilities. No coercion should be involved when drafting a prenuptial agreement. A couple can also create a postnuptial agreement, if they start a business after marriage.

Business and personal finances should be kept separate because commingling personal assets and liabilities with business assets and liabilities can complicate equal division. It might be prudent to keep once spouse uninvolved with the operation of a business for easier identification and to save the business from being part of a long and dramatic divorce.

Business assets can create a complex divorce case. It is essential for entrepreneurs to know how to protect their businesses from potential divorce problems. A little legal planning may safeguard a couple’s business and help facilitate a smooth divorce, if one becomes necessary.

Source: Tech Cocktail, “10 Rules All Entrepreneurs Must Follow to Divorce-Proof Their Business Financially,” Zach Schleien, Dec. 27, 2014

2022-03-25T08:20:05+00:0009 Jan 2015|
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