When you own a business, you think about protecting it from theft and natural disasters, take out insurance, and make physical improvements to your place of business to make it more secure. You may not consider divorce to be on the same level as a break-in or a tornado, but divorce is actually more prevalent than most situations businesses need to be prepared for – and can be as damaging to a business’s cash flow and long-term health.
If you are a business owner, there are steps you can take to protect your business in case of a divorce, and additional steps you should take once a divorce is underway. These steps will not only help your business weather a divorce, they’ll also help simplify the complications that business ownership can introduce into arriving at a divorce settlement.
Seek the right legal counsel. Once you’re starting the divorce process, you’ll want a good family law lawyer – preferably with business experience – to help you manage the personal and business aspects of the divorce, and to keep them as separate as possible. You can take steps to protect your business before you get married, by creating a prenuptial agreement that includes provisions governing your business assets.
Be disciplined in how you manage your business. Make sure you keep clean financial records, keep your family accounts and cash flow separate from your business accounts, and make sure that your compensation from your business is fair and reasonable.
Protect all the owners from divorce. If you’re in business with others, you want your business agreement or shareholder agreement to address valuation of the company if a divorce is filed against one of the owners. While the agreement might not be binding in court, it does show an intention to minimize business disruption to the other owners.
Seek professional valuation. If divorce is inevitable, it will need to be properly valued by a professional business valuator. The more organized and accessible your records are, the better this process will go.
Don’t wait until you’re facing a divorce to safeguard your business against the damage it can do. While these tips provide some strategies to protect your business in divorce, a lawyer can answer questions that might pertain specifically to your business, and help you create the strategy that best fits what you need.