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How divorce can affect your business

Divorce often is a complicated, emotionally taxing process. It can become even more messy if you own your own business, or run a family business. How are you going to keep your business running if your spouse is your co-partner? How will a divorce settlement affect the health of your business?

Protecting your business before divorce

Hopefully, you set up your business to succeed and implemented one of these three legal agreements to protect your business assets in a divorce:

  • Your former spouse signed a prenuptial agreement, laying out how your business was a separate entity from any marital property or assets.
  • Your former spouse signed a partnership agreement if they are part of the business’ ownership or operations. This agreement should detail how the business will be split in case of divorce.
  • Your former spouse signed a postnuptial agreement.

If you haven’t filed for divorce yet, consider completing a post-nuptial agreement. In these agreements, you can define how to divide your property and business assets in case of divorce.

Also, pay yourself a fair salary while you run your business. If you have haven’t, your ex could claim you undercompensated yourself and thus they are entitled to a larger share of the business.

Finally, you’ll need to get your business evaluated for its worth by an outside consultant. Many factors will determine your business’ worth—any profits, trademarks, property, debts, the business’ reputation and labor force—and you’ll want those accurately assessed to know what share your ex may receive in a settlement.

After your divorce settlement

If you decide not to sell your business and split the proceeds with your spouse, you most likely will have to buy out your spouse’s ownership share in your divorce settlement. You could do that by giving your ex a larger share of your retirement savings, investments or property ownership.

You also can arrange for a property settlement note. With a property settlement note, you arrange long-term payments to your spouse to buy out their share of the business.

Staying level headed as you go through this process will be difficult. But if you want to get a quick resolution, you want to remain calm and continue to keep your business running as smoothly as possible during this transition.

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