As an entrepreneur, your business is more than just a way to pay the bills. It is your livelihood and a major part of your personal identity.
During a divorce case, your business will likely fall under the category of marital assets that you must divide with your spouse. Whether you are considering divorce or not, taking steps to protect your business is extremely important for safeguarding your future.
1. Sign a written agreement
A prenuptial agreement can preserve your business and any of your other private assets, as well as those of your spouse-to-be. While there may be a negative connotation to asking for a prenup, your spouse might reach an understanding if you explain the personal importance of your business. If you are already married, a postnuptial agreement can serve the same purpose.
2. Structure your business as a separate entity
You should start separating personal and business assets as soon as possible. Utilize separate bank accounts and position your business as an employer that pays you a regular salary so as to establish it as an entity separate from your marriage.
3. Remove your spouse from the business
If divorce is imminent and it is too late for preventative measures, you can take steps to lessen your spouse’s involvement with the business. The less responsibility your spouse has for the business’s profits, the less of a claim they will have over those assets in the divorce.
Without a plan to divorce-proof your business, there is the possibility that you will have to split the company down the middle or sell it off entirely. By planning ahead for a worst-case scenario, however, you protect yourself from having to restart your venture from ground zero.