Getting divorced is much more complicated and time-consuming than getting married, and may require property division that you did not expect or protect against. Business owners are often particularly vulnerable in divorce because a business may count as marital property. Without careful planning and willingness to make sacrifices, a business owner's divorce can end the marriage as well as the business.
If you are considering divorce and own a business, you cannot afford to put off building a strong legal strategy. Owning a business can sometimes help you recover from divorce's financial ramifications, but not if the business doesn't survive the divorce process.
Is your business protected?
You may have had the foresight to protect your business with a prenuptial agreement, which is always wise. However, you shouldn't count on these protections without reviewing your prenuptial agreement carefully. A skilled attorney may find weaknesses in the agreement, so you must examine these protections carefully before you assume that the business is safe.
Does your spouse have a valid claim to partial ownership?
Both spouses own marital property equally, at least in most cases. This includes assets and debt, which may be useful to know when it comes to negotiating a fair settlement. If your business counts as marital property, then your spouse may claim a significant portion of your ownership.
In some cases, you may have grounds to argue that your business is not marital property because your spouse has little or nothing to do with its operation, especially if you owned the business prior to your marriage. The more involvement your spouse has in the business, the more difficult it is to claim that they do not deserve a portion of its value. Make sure to keep your personal and business matters as separate as possible, and keep clean, orderly books to prove it.
How much is fair?
If you cannot avoid splitting your owned value in the business with your spouse, you should consider a professional business valuation. An independent valuation breaks down many complex aspects of your business so that both you and your spouse have a clear picture of its worth and the portion of that worth you must divide. This protects you from leveraging away more of your value in the business than necessary, and lays out clear figures for negotiation.
You may have liquid assets large enough to buy your spouse out of their share of the value, or you may need to get more creative, if you want to keep you business afloat through the divorce. You may consider creating a structured repayment plan with your spouse to make up the difference, or may need to offer them other valuable assets such as your home or a significant piece of property.
Don't wait to build strong protections for yourself and your rights. Divorce is rarely easy, but it doesn't have to be a nightmare. A strong business can help you rebuild yourself and your life on the other side of divorce, so be sure to count the costs as you build your divorce strategy.