What are some options to protect a business in a divorce?

On Behalf of | Apr 29, 2022 | Business Owner Divorce, Divorce

Protecting your business in a divorce is essential to ensure you do not have to close it. However, if you lack a pre-or post-nuptial agreement, it can be difficult.

NFIB explains there are a few things you can do if you realize a divorce is imminent that will protect your business. Keep in mind that you must take any steps prior to filing divorce or service of divorce papers.

Partnership agreement

You can alter your partnership agreement to include a clause that requires the other partners to approve any changes in the agreement. If you expect to take on more partners, you can also include something to protect them that requires a prenuptial agreement or signed waiver from future spouses that they will not have an interest in the business.

Create an income

Pay yourself a salary. This offers you some protection as an employee of the business. It would show that your money earned was marital property, but the business itself may remain separate.  It also helps ensure that your spouse cannot claim you invested anything into the household and that all your money was tied up in the business. That may not help with saving your business but it can prevent your spouse from claiming rights to all the other assets you own.

Absent any type of agreement, it is very difficult to prove to the court that your business is separate property. If you fail to cement the business separately, the court could make you divide it with your spouse, which could mean you have to sell it.

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