Divorce is complicated, and as a business owner it can be particularly problematic. You may be the sole owner of your business but that doesn’t guarantee it will be protected should your marriage end in divorce.
Thankfully, whether your business was started during or before your marriage, there are still ways you can protect it from becoming potential divorce collateral.
- Postnuptial agreement
A postnuptial agreement is essentially the same thing as a prenuptial agreement, a contract between you and your partner. The difference being that it’s negotiated and signed after you’re already married. The intricacies of a postnup can be a little more complex than a prenup, which means it might take a little extra work. Don’t let that discourage you; it’s worth clearing the red tape and protecting what you’ve worked so hard for.
- Form a Corporation or LLC
When you form a corporation or LLC, your business becomes a separate legal entity. This allows you to purchase and control company assets under the ownership of your company. However, things can get complicated if marital funds are used pay company expenses. In this case, a judge may consider your business a comingled asset since marital funds helped nurture its growth.
- Create a living trust
Another option is to place your business in a living trust. Choosing this option means electing a trustee (third-party entity) and granting them ownership over your business and your business assets. The trustee has an obligation to look out for the best interest of your business and, if necessary, can be renamed at any time.
- Maintain a healthy relationship with your spouse
In some situations, despite your best efforts, there simply isn’t a way to separate business assets from marital assets. For this reason and countless others, maintaining a working relationship with your spouse may be in the best interest of your business.
Remaining honest and keeping communication open will be a lot more beneficial to you during the divorce process than if you shut them out. Your spouse is more likely to make irrational demands and act out of spite if they believe you’re hiding something or trying to fool them.