Businesses and professional practices are valuable assets, but they can also be a source of stress and challenges when people file for divorce. For example, some small business owners and successful professionals may worry that they may have to share ownership or even management of their business with their spouse when they divorce.
While sharing in the property acquired during the marriage is standard in most divorces, business owners can protect their right to managerial control and sole ownership of their business in many cases. The right approach to the divorce process will drastically increase the likelihood of a favorable outcome with minimal impact on the business.
How do business owners protect their companies from chaos during divorce proceedings?
1. They settle instead of going to court
One of the simplest ways for those invested in a small business or professional practice to protect their ownership interest during a divorce is to work with their spouse to negotiate a divorce settlement that everyone believes is reasonable. There is no worry about a judge making an unpredictable decision in an uncontested divorce. Spouses have total control over the terms that they set, provided that they are able to reach an agreement. A willingness to compromise in other aspects of a divorce will increase someone’s chances of securing specific terms that they desire, like sole ownership and management of their business.
2. They are careful when placing a value on the business
A proper business valuation that looks at asset depreciation, economic uncertainty and other factors to balance out assets and revenue can help guide the property division process. Even when the ownership of the business is not in play in the divorce, its value can have a major impact on what other assets someone receives in the property division process. Being accurate and appropriate when valuing a business can help protect someone’s investment in the company.
3. They negotiate postnuptial agreements
A business owner doesn’t have to wait until a divorce is imminent to protect the company they’ve built. Those who start businesses during marriage take a lot of risks financially. They will also often put a lot of strain on their marriages, which makes drafting a postnuptial agreement a smart move. They can protect certain assets and clarify what would occur should they divorce.
Taking decisive steps to protect a company can give business owners facing divorce peace of mind about the future of their organization after their familial changes.