How to Protect Your Business During a Divorce
2.3 million couples wed every year in the US. Unfortunately, half of them will likely end up in divorce, according to research. Divorce in subsequent marriages is even higher at 67% for the second, and 73% for third marriages.
While we all want a “happy ending” to our marriage, the reality is that it may not happen. And even if it is physically and mentally tormenting, divorce may be the best solution to a dwindling relationship.
But divorce itself is another painful process. There’s just so much to consider – the kids, your properties, your finances, and your business which is your most valuable financial asset.
Divorce proceedings are also very expensive. From filing the petition to getting settlements, divorce can cost you $15,500 on average. Of course, the cost shouldn’t hold you back from ending an unhealthy marriage. You can always find financing help, such as payday loans online for divorce costs.
How to Protect Your Business from Divorce
You know it – it’s never easy to put up a business. It takes blood and sweat. You most likely spent countless hours and sleepless nights creating a perfect business model and spent most if not all of your savings to it. Little you know, once you file for a divorce, your spouse may be entitled to as much as 50% of your business. That hurts, especially when you’re the only one who worked hard for it.
Perhaps the last thing you want to happen is for your former spouse to become your business partner. So how do you protect your business against the consequences of a divorce?
Hope for the best but expect the worst
No couple gets married thinking that they will end up in divorce. While you must hope for the best, you should still anticipate the worst possible scenario especially if you have a lot of financial assets. Take note that the business you started prior to your marriage is considered ‘individual property’, not a ‘shared property’. However, any increase in value during the course of your marriage may be considered marital property and therefore can be subject to equal distribution in a divorce. The best way to protect your business from divorce is by creating a prenuptial agreement. It allows you to determine your pre-existing assets and prevent your spouse from any claims over it in the future.
Consult an attorney
Know your state laws concerning valuation and division of marital property during divorce. It always pays to consult a good lawyer to make sure that you understand the bits and pieces of the said laws, and know what to do when the worst-case scenario happens. If you’re already going through a divorce proceeding, the more you will need an attorney who will find ways to protect your business. There are various options to ensure that your ex-spouse doesn’t get a hold of your business even if you lack premarital agreement and your lawyer should be able to find the best one.
Have your property evaluated by a third-party
Usually, the court appoints a valuation professional to determine the business’s value (which is often based on a 10-year projection of growth or revenue). Such valuation is very important if you opt to buy out your ex’s share in the business. So a crucial step is to hire a third-party organization to ensure the accuracy and fairness of the valuation.
Give up other assets in exchange for full business ownership
In case you don’t have enough money to buy out your ex’s share of the company, you have the option to trade off other assets to gain full business ownership. Such assets may include your other investments, equipment, corporate stocks, and other valuable possessions. Additionally, you may start building your own personal assets as soon as possible especially when you start noticing that your marriage is dwindling. As a precaution, you should be able to raise enough funds to pay a large sum of money or make monthly repayments to your ex so you could have full ownership of your business.
Remove his involvement in your business
Did you know that the amount of time your spouse spent in helping you build your business can be used to justify his/her share in your company? It doesn’t matter whether your spouse is holding a minor role in your company. Removing his/her involvement is one of the best ways to protect your business against divorce claims.If you want to protect your business against the devastating consequences of divorce, consider these steps. Your business is one of your most valuable financial assets. It took you blood and sweat to build and grow your company. The last thing you want to happen is to see your business fall into the hands of your ex-spouse after your divorce.