Maybe financially you are super happy. Your business is soaring and you’re making a killing on profits every month. Sadly though, your marriage is ending. You might want to get a divorce but you are also unsure of how to proceed with your business doing so well. You don’t want to lose your company or split all your assets when it comes to your divorce. You worked hard to get your business to where it is now and you feel it would be unfair to share your hard-earned cash with your ex.
You might not want your ex to be your business partner after a divorce, or even worse, have to sell your business to pay for your divorce and all other costs that might be involved. Business is viewed as an asset if you started the business during your marriage. Therefore, your company is considered a joint asset.
Keep reading for 10 awesome insightful tips on how to go about getting a divorce if you have a business.
1. Take preventative measures before you get married or start a business.
- Sign a Prenup: Complete Case claims: “If you started a business before you were married, it will be very wise to sign a prenup”. This will increase your chances of surviving your divorce with your business intact and still in your name. You can then designate your business as separate from your marital assets and state the business belongs solely to you.
- Place the business in a trust: This is quite an interesting way of keeping your business out of a divorce. If you can put your business in a trust it stops your business from being seen as a marital asset. The business belongs to the trust and not to you. This will also protect the growth of your business.
- Have a postnup: A postnup, is like a prenup but it can occur early on in your marriage. It is possible to do this, even though courts don’t like the idea. A postnup has to be done early in your marriage though, preferably several years before your marriage comes to an end. In a postnup, you can define your business as separate property from your marriage.
- Have insurance: You could have life insurance that could be liquidated if need be to provide funds or buy out a partner’s share of the company if need be.
- Have a buy and sell agreement: This is an agreement that you can have in place that will state what will happen to your business if anything in the owner’s status changes, such as in the case of a divorce. In this document, you can state that your spouse might be limited in what they can obtain from your business, such as acquiring ownership or deprive your spouse of any voting rights. You could also state that you and your other partners can buy your ex out at a low price, if any interest is awarded to your ex, regarding your business.
The best thing to do before any marriage is to sign a prenup. Even if you feel your marriage will last forever, a prenup is always an excellent way of securing your future if anything goes wrong. If you take these preventative measures, this can save your business during a divorce.
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2. Pay yourself a great salary and do not use family money
When it comes to owning your own business, pay yourself a good salary. If you use your family cash flow to build your business, your ex’s lawyer might use that as a way to entitle your ex to more of the business.
3. Keep good records and have a valuation done.
When it comes to having a successful business, it is wise to make sure that you keep detailed records of everything. Never borrow family money to buy things for the business. If you keep good records, you can also show the judge all that you put into your business.
Make sure you know your cash flow, your debts, and your profits. You can also always have a business valuator come and do an evaluation of your business. This will help you know exactly what your business is worth. This will help if you want to keep the business or buy it out from your ex. You can use an appointed court evaluator or your own. But it would be good for either spouse to have a valuation done, just in case one of the valuators puts in a false evaluation.
4. How to divide the business, if need be.
If you have to divide your business during a divorce, you can do one of 2 things. You can either decide to sell the business and divide the profits between one another or, you could decide to both have shares in the business and be partners. The latter is not always easy. There is also another circumstance.
Perhaps one party would like to keep the business. If this is the case, the partner who wants the business, can buy out the others share, or give them something that has the same value, such as the marital home.
5. Give up other assets
If you really want to keep your business and not share with your ex, you could always give up another asset. For example, in order to keep your business, you could give your spouse the house, the car or retirement funds. It is always wise to speak to a lawyer before you sign anything.
6. Make payments over time
You could also arrange to pay off your ex so that you can have their share. You could do this gradually over time via money that you make from the business.
7. You could fire your spouse
If your spouse is involved in your business, you could also fire them from your company. It would be wise to ease them out of your company before a divorce commences and gets ugly. If your spouse has also been disruptive with your business during the divorce, or they have caused issues in your business, you could have a good reason to fire them from your company.
Remember that every accusation you make needs to be backed up by strong supporting evidence. Always discuss any issues with your lawyer before you make any rash decisions.
8. Can you get money out of your spouse’s business if your name isn’t on anything?
If your spouse started the business after you were married, the business is considered a marital asset, therefore the assets will be divided between the two of you. You might not be able to own a portion of the business, but the assets will be divided during your divorce.
9. Look for a lawyer who will resolve the issues
This is so important. You want to hire a lawyer who will help you resolve your issues. You do not want to hire a lawyer who wants to fight. Fighting prolongs the divorce process and things could get really costly.
10. Don’t make your spouse a director in your company
Many entrepreneurs make their spouses a director in the company for tax purposes. Don’t do this. If you do this, your spouse could show the courts that they have a right to everything in your company, even though they did nothing in your company. You could rather give them shares in the business or make them company secretary. If they are directors, they could say that they had a much greater role in the company, even if they didn’t.
When it comes to getting a divorce and owning a business, you have to really do your research. You will definitely need to consult an attorney to make sure that you get exactly what you want. An attorney will help you prepare your case so that the division of assets will be fair. Every divorce is different, as well as every circumstance. Never sign any documentation without the advice of a lawyer.