Are you getting a divorce and worried about the future of your small business? Whether you began it before marriage or it was a joint venture, your business will be a part of the divorce. Therefore, you need to know how you can protect it.
The best way is by including it in a prenuptial agreement. But what if you do not have a prenup, or the business came along after the marriage? You can create a postnuptial agreement for these situations, whether or not you believe a divorce is impending. Once you are at the point of divorce, however, you can still protect your business in the following ways.
Keep accurate records
If the business is your own, you need to be able to prove it. Any value it obtained throughout the marriage may become marital property. Additionally, any joint money you used and any finances or work your spouse contributed also make the business marital property. Accurate records can show the roles you each played in the business. They can also prove that you are not hiding any assets, or that your spouse is.
Get a professional valuation
Have a professional determine the value of your business. This ensures that you and your spouse will get your fair shares of the company. It can also help during the property division process if you decide to exchange ownership of certain assets instead of splitting them all down the middle. Knowing the value is also beneficial for the judge in determining child and spousal support.
Consider funding options
You may have to buy out your spouse, or you may become solely responsible for the business and its debts. Regardless of the circumstances, you need to consider your options for loans, payments and other financial obligations. Options may include:
- Selling a minority stake
- Finding an angel investor
- Tapping into relevant insurance policies
- Setting up a monthly payment plan
After your divorce and before another relationship, further protect your business through a trust or buy-sell agreement, and a prenup and postnup once a second marriage enters the picture.
