As a business owner, your company is likely one of the most expensive and valuable assets you own. It’s crucial to look out for your business’s best interests, even as your marriage ends, especially if you plan to continue owning and operating the business after the divorce.
At the same time, it’s important to note that the business may be considered marital property. For instance, if the business has increased in value during your marriage, your spouse may have a right to a portion of that increase, especially if they contributed directly or indirectly. Here are some steps you can take to protect your business.
Consider a postnuptial agreement
If your spouse agrees, you can have them sign a postnuptial agreement waiving their right to the business or its assets. This is similar to a prenuptial agreement in that both parties must sign it willingly, but it can be drafted after the marriage. However, this approach may not work if your spouse refuses to sign or if the divorce process is already underway.
Have a business valuation done
It’s crucial to have a business valuation conducted during this time. This helps to define exactly what your spouse may be entitled to. For example, they may claim your business is worth $5 million and request half, while you know the business is only worth $1 million. A third-party valuation can provide solid numbers based on the business’s assets, market value, expected income and other financial details.
Consider giving up other assets
If retaining full ownership of the business is your top priority, negotiating with your spouse may be worthwhile. For instance, if they want to keep the marital home or an investment account, you could allow them to take full ownership of these assets in exchange for their share of the business. Compromise can be effective, as long as you focus on what’s most important to you during property division.
Consider your legal options
More than anything else, working with an experienced law firm can be invaluable during this time. Understanding all your legal options is essential to safeguarding your business interests and protecting your company for the future.