The Business of Breaking Up: How to Protect Your Company In a Divorce

Business.com / Legal / Last Modified: February 22, 2017

Your business may be considered an asset if you get divorced. So how can you protect it in the event that you split from your partner?

Statistically, with 42 percent of marriages ending in divorce, it is almost as likely that you will separate from your partner as it is to remain married to them for life.

It is hardly the most romantic thought (nor admittedly the most inspiring way to begin an article) but it is nevertheless an important statistic for business owners to keep in mind.

After all, your business, the enterprise you have helped to develop after long hours and financial uncertainty is likely to be brought into the divorce process if you do split from your partner.

Similar to your car or home, a business is considered an asset and its value can, therefore, be split between the divorcing couple.

Related Article:The 8 Types of Insurance Your Business Actually Needs

Advice for Entrepreneurs With Their Own Business Who Are Getting Married

For business people who are either currently married or in a serious relationship and are considering tying the knot, the possibility that it might not work out, however remote it may seem, and however upsetting the thought might be is one that should be taken into account. It allows entrepreneurs, particularly those who have started small businesses, to make precautions that will protect the majority of your company in the tragic event of a divorce.

Businesses started before you were married will normally be considered individual property rather than shared property. If your business remains the same value between the marriage and separation you may be fortunate enough to not have it dragged into a divorce settlement.

This is your venture and it has not contributed any more money to the overall household income since it began. Any increase in value, however, may be considered marital property as it will have been earned during your partnership. Solicitors who specialize in divorce law advise that the increased value can, therefore, be subject to equal distribution in a divorce.

Related Article: Are You Ready to Start a Business? 5 Burning Questions You Need to Ask Yourself

Businesses Founded After a Marriage or That Your Partner Is Part Of

Whether you plan to start a business after your marriage or you have one you believe could increase in value, the best option for retaining all of your income is to have both you and your partner sign a prenuptial or post-nuptial agreement.

Although synonymous with rich celebrities, these agreements are actually beneficial for everyone. They allow you to determine who has the right to what assets in the event a marriage breaks down. It is by no means the most pleasant topic of discussion during your wedding preparations, but it can be mutually beneficial.

Although a business founded before a marriage is generally individual property, an exception is made when your spouse has contributed to the company in some way. In this scenario, the business will be considered full marital property as they have then actively contributed to its success. Family law experts, for precisely this reason, recommend against hiring your husband or wife for a role at the company. You should, furthermore, keep your personal and business expenses separate.

Related Article: Divorce Is a Business Threat: Protecting Your Company With a Prenup

Is It Too Late to Protect the Business if I'm Going Through a Divorce?

If it is too late to make preparations and you are already going through the divorce process, there are options you can take to ensure your business is left unscathed. Your husband or wife may not necessarily have any interest in the business itself as much as its financial value. Therefore, you could look to make up the value with other assets of an equivalent worth. This could be in the form of stocks, material items or a home.

One would have to be utterly heartless to warn business-people not to get married due to the risk it might do to their business in the event of a divorce. No-one can predict how a relationship will turn out, and no-one should let that risk stand in the way of pleasure and happiness if marriage is what you want.

However, a simple understanding of how a divorce can impact a business, as well as some sensible forward-thinking in order to ensure it is unharmed in the event a marriage dissolves, is worthwhile. Hopefully, it will be an unnecessary waste of time, but you might just look back on it as a good call.

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