Being an entrepreneur, and having the freedom to create and control your own business, can be extremely rewarding. However, when your marriage is on shaky ground, it can also leave you feeling vulnerable and exposed – not knowing what will happen to the business in the event of divorce. This is why it is so important to get information early on in the planning process, so you can make smart decisions about both your business and your divorce.
What kind of planning you will need to do to protect your business in the event of a divorce will depend on many factors, including: the type of business entity you own, whether the shares are transferable, whether you have partners or other shareholders in the business, and when the business was formed.
For instance, if the company was formed before marriage, it may be possible to establish that the business is separate property. If that is the case, it is imperative that the owner of the business keep good records of financial contributions and withdrawals made during the marriage.
If your spouse works in your business, and/or has access to vital information regarding your business, you will need to consider how that can impact your business. Contingency planning is critical.
When facing divorce, questions often arise about how the business will be divided in divorce. There are many options when it comes to dividing the business interest, and the best option will depend upon your unique circumstances.
One of the most important decisions you will make is the process you choose to end your marriage. Oftentimes, the collaborative divorce process gives business owners more options to find a creative solution, allows the parties to protect the integrity of the business by keeping the negotiations private, and streamlines the process by relying on a common set of experts (e.g., business valuation expert). These types of constructive, problem-solving tools allow us to find better options to ensure the future success of the business, which is usually in everyone’s best interest.
These are just a few examples of the different variables that should be taken into consideration if you own a business and are considering divorce. It is vitally important to plan well for the proceedings. If you do not have the luxury of planning in advance, it is important to have an advocate who understands the intricacies of business ownership and who can help you protect and preserve what you have worked so hard to build. Reach out to us at Hargrave Family Law to discuss how we can help you protect your business and your future prosperity during your divorce.