When people get married, they always hope for ‘happily ever after,’ the sad fact is that 52 percent of all first marriages and 70 percent of second and third marriages end in divorce. Divorce is difficult for everybody involved. When one or both spouses own a business, the process can be that much worse. Your business is your baby. You nurtured and grew it from conception to asset. It’s probably one of your most valuable assets. In many instances, that business can be crippled by divorce because your spouse may be entitled to half of it.
how do you protect your business? First understand that there are two types of properties: Separate and Marital.
“Separate” properties are generally those that were owned prior to the marriage or were given to a single spouse by a third party.
Marital property consists of all income and assets acquired by either spouse during the marriage including: Pension plans; 401(k)s, IRAs and other retirement plans; deferred compensation; stock options; restricted stocks and other equity; bonuses; commissions; country club memberships; annuities; life insurance (especially those with cash values); brokerage accounts – mutual funds, stocks, bonds, etc; bank accounts – checking, savings, CDs, etc; closely-held businesses; professional practices and licenses; real estate; limited partnerships; cars, boats, etc; art, antiques; tax refunds
How do you protect your business in the event of a divorce? First, get a Prenup. A pre-nuptial agreement can protect your business. A good pre-nuptial agreement can override state laws that oversee fair distribution or assets.
If the horse is out of the barn already and there is no pre-nup, you can always add provisions to your partnership agreement that prevent unapproved transfers of shares or give the shareholders the right of first refusal to purchase shares before any unapproved transfers take place.
You should also make sure you are paying yourself a competitive salary. If you simply re-invest all of your money back into the business, your spouse can take a larger percentage because they never received their share of the benefits of the business.
If all else fails, you can always offer to purchase your spouse’s share of the business. In the end, it’s always important that you protect yourself and your assets. get a pre-nuptial agreement.
