What you can do to divorce-proof your business

On Behalf of | Mar 31, 2023 | Divorce |

If it seems as if divorce is imminent, you will likely find yourself contemplating how you can maintain your current quality of life even after a split. This is especially so for business owners who must come to terms with the possibility of losing some or all of the company.

Business assets obtained during the course of a marriage are marital property, meaning that your spouse has the right to their fair share. The worst-case scenario is that you might have to liquidate the entire company to facilitate an equitable split, so it is important for you to know what you can do ahead of time to divorce-proof your business.

Sign a separation agreement

Discussing a prenuptial agreement prior to marriage gives you the chance to protect your ownership of business assets in the event of a divorce. If you do not have a prenuptial agreement in place, you can undergo mediation with your spouse to negotiate a postnuptial separation agreement instead.

Leverage a business valuation

A professional business valuation is an accurate and unbiased evaluation of your business’s worth based on current assets and future income potential. You can leverage this as a powerful negotiation tool when discussing asset division during a divorce.

Separate the business from your marriage

If you can position your business as an entity entirely separate from your marriage, there will be fewer business-related assets that you must report as marital property. One way to accomplish this is by structuring the company as an employer that pays you a salary and by using separate business bank accounts.

As an entrepreneur, your business is an important part of your livelihood. Adequately divorce-proofing your business ensures you can maintain the same lifestyle and earning potential after an otherwise life-altering separation.