Whether you run a retail business, a pool service company or a small professional practice that employs just you and a part-time office support professional, your business could be in a vulnerable position if you get a divorce.
Quite a few people only learn when they decide to file for divorce that the courts may consider their business marital property potentially subject to division with their spouse. There are three relatively sound strategies that can help you protect your business if you find yourself considering divorce or if you are just about to start a business while married.
Talk to your spouse about signing a marital agreement
If you aren’t yet married, a prenuptial agreement can designate your business or any future business you start as separate property. If you are already married, it’s possible that your spouse might agree to execute a postnuptial agreement either because you have begun discussing divorce or because you need the protection for the business.
If you are able to reach terms that allow you to earmark the business as your separate property, you can then have the security of knowing the business remains yours if you divorce.
Avoid commingling even if you have a marital agreement
One of the worst things that you can do from a legal and financial standpoint as a small business owner is to commingle your personal finances with your business funds.
Not only will using one bank account for both your household and your business leave your personal assets vulnerable if anyone ever tries to sue your company, but that commingling could affect the status of the business in a divorce as well. The more it seems like marital assets have helped fund the company, the less likely the courts are to treat the business as separate property.
Consider mediation if you know divorce is imminent
Once you file a contested divorce, the courts have the final say in everything. If you and your ex can work together through mediation, you may be able to reach your own resolutions for all of the major issues, such as ownership of the business, before you even file for divorce.
As a business owner, you will need to take extra precautions before you file for divorce and while going through a divorce in order to protect your business investment.