You’ve built a strong business that you’re proud of. It’s the greatest achievement of your career.
But when you suddenly find yourself facing the prospect of divorce, you wonder what you stand to lose. The good news is there are factors that could help give you clarity on happens to your business in a divorce.
Having a prenuptial agreement will help with protecting your business in a divorce. A prenuptial agreement is a legal contract you and your spouse sign before getting married. The prenup—among other things—can outline what would belong to each party in the event of a divorce. The document is likely to include subjects such as alimony and property rights. If your business is included in your prenup, it can help keep your business in your hands following a divorce.
Separate vs. marital property
Understanding the difference between separate and marital property will also help you understand how your business will move through divorce. Separate property includes inheritance received by one spouse and property owned prior to the marriage. If you started your business before you got married—and have kept your business-related accounts separate from your spouse—this is likely separate property.
Marital property includes assets that both parties own or were acquired during the marriage. If you started your business after you got married and haven’t taken steps to protect it, it will likely be considered marital property in a divorce.
Spouse’s involvement in the business
If your spouse was involved in—or contributed to—your business while you were married, this could allow them to lay claim to part of it. For this reason, business owners looking to get their spouse out of their business will often buy them out. Here are a few ways to do this:
- Selling your business and dividing the sale price. If the business has most of your assets, this could be the only way to pay off your spouse.
- Using assets such as real estate, stocks and cash to pay off your spouse
- Creating a Property Settlement Note—a long-term payment plan that compensates your ex for the price of their share of the business
Divorce can be a stressful and difficult time in a business owner’s life. Protecting your business is your priority. Taking steps to protect your business in the event of a divorce can help your business continue to thrive.