Divorce impacts many aspects of your life. Besides your personal and home life, it can also disrupt your business. Entrepreneurs work extremely hard, and the thought of a divorce destroying your business can be quite frightening. In this article, we’ll discuss how divorce could impact your business and some things you can do to protect your business during divorce.
Prenuptial & Postnuptial Agreement
While many people may think that prenuptial agreements always need to be complete before a divorce, that’s not always the case. Prenups can be put in place during and even while ending a marriage. But, if you start your business while you’re married, it does become more difficult. Some states don’t recognize postnuptial agreements, and they tend to be looked at closer in court.
Postnups are often seen as updates to prenups that were already put in place. Your financial situation can change drastically from the time you say “I do” until the time you say, “I don’t.” Inheritance, new business, and many other factors can change the way debts, assets, and property are divided in the case of divorce.
A postnup can also layout that in case of divorce, a spouse will receive a certain amount of money or assets before a specific date. This could protect business owners when it comes to future income and assets.
Of course, getting a prenup before marriage is always the easiest and most ideal way of going about the process. Some people feel awkward about bringing up the idea of a prenuptial agreement before marriage, but it can help protect your business and finances in case you do get divorced.
Keep Track of Your Accounts
When you’re married, it’s easy to fall into the “what’s yours is mine” mentality, especially if one spouse is helping another spouse get their new business off the ground. During the process, you may not think anything of it, but if you get divorced, it can complicate things.
If your spouse had involvement with the business, it should be clearly outlined to show what they have contributed. Any assets, income, and profits earned while you were married will play into the divorce settlement. That’s why knowing what each party contributed is essential. Having everything documented and in order can save a lot of time and headaches.
When a business is involved, you may also need to get your business professionally valued. This is true if one person wants to buy the other out, or if you want to split the company and close it.
Separate Business and Home Life
In some cases, one spouse had no involvement in the other spouse’s business, but the divorce can still impact your professional life. If your home was your office, you might have to look for a new office when you’re getting divorced. It’s important to keep your home and business separate during this time. Not doing so can disrupt and negatively affect your business. Keeping your business stable is key to protecting it during a divorce.
Know the Difference Between Separate and Marital Property
While the rules can vary from state to state, generally, separate property includes property owned before the marriage, inheritance one spouse received, and gifts that were received to just one spouse.
Separate property, like a small business that was owned before marriage, can become marital property if it’s not protected. If property becomes mixed or bank accounts get linked, it will become marital property. Keeping your business accounts and dealings separate from your marital ones is always vital.
Any property, income, and assets acquired during the marriage will be considered marital property. In many states, if separately owned property rises in value during the marriage, that increase can be regarded as marital property.
Avoid going to court
Taking your divorce case to court can not only get expensive, but it also becomes more complicated. The court will have the final say in what happens to your assets, which may not be in your best interest. Many divorce cases that don’t have a criminal aspect to them can be resolved quickly and out of court.
If you and your spouse can agree without going to court, you may both be happier with the outcome. Agreeing out of court can let you take better control of your situation and your finances.
In the end, it’s essential to be educated about how to protect your business during the divorce because it can drastically impact the outcome and your finances.