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How to protect your business in divorce

On Behalf of | Aug 20, 2021 | Divorce

You are thinking about divorce, but you’re afraid that you’ll need to give up a part of your life’s project to your ex if you go through with it. It would be possible for your ex to get a share of your business if you decide to divorce. However, there are some measures you can take to prevent that from happening.

Establish a buy-sell agreement

One way to protect your business is by establishing a buy-sell agreement with your partners. Buy-sell agreements have the objective of controlling a business’ ownership. They specify to whom, when, and for how much a partner can sell their interest in the company. These agreements come into force in specific situations, such as the death or divorce of an owner. If you create an agreement, your spouse will need to sell their interest to your business or one of the other owners.

Pay yourself a competitive salary

Your spouse could get some of your business assets if they claim that you spent most of your income on the company and not on the household. As income acquired during the marriage is marital property, your spouse could argue that they have the right to those assets as they did not receive a fair share of them in the past. To avoid this, you could start paying yourself a competitive salary and use it on the household rather than reinvesting it in your business.

Sign a postnuptial agreement

If you have not talked to your spouse about divorce yet, you could propose to them signing a postnuptial agreement. In a postnuptial agreement, you can specify which assets you’ll keep in the event of a divorce. If you include your business assets, your spouse won’t be able to access them if you divorce.

Negotiate

If you don’t have time to take any of the previous measures, you will need to make some sacrifices to keep your business intact. You can offer your spouse other assets you own in exchange for their share of the business. Giving up a car, a house or luxury items may be a big sacrifice to make. Still, it would be better to lose those things than a share of your life’s project.

Keeping what is yours

The last thing you want is your spouse taking away the business you built. However, you can prevent this by taking some of the measures discussed. That way, you can keep and save your business, or at least give your ex as few assets as possible if you decide to divorce.

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