The divorce process often includes a variety of complications when it comes to property distribution. It may become as complicated as custodial issues. When we talk about divorce with a business involved, things never get easier. In contrast, spouses can hardly come to an agreement when business and interests are involved, and the case is often dragged out in court for many months. So, if you own a business and divorce is on the horizon, or even if you hope you will never separate, it is still essential to protect your assets and be ready for possible outcomes. Review the threats the divorce may bring to your business and study the defensive strategies for positive aftermath.
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How Divorce Affects Your Business
No matter whether you are ready to file for divorce in Virginia online amicably or opt for harsher negotiation in court, your business assets will suffer. Study the possible risk to get prepared for their protection.
Financial Loss
The divorce threat you are not likely to evade is financial loss. As a result of a divorce settlement, you are going to lose part of your shares in the business. This means you will suffer financially and have your spouse grab an impact on your business as well. So if you have the slightest chance to dissolve your marriage peacefully, go for it. In the aftermath, you have more chances to preserve your business evolving and avoid extra financial arguments.
Property Distribution
When it comes to divorce and business assets, you should count the local legislature. Most states follow the equitable distribution principle, meaning that the shares you and your spouse will get are defined by the court. The judge will count your involvement in business, financial background, and other details. Meanwhile, nine community property states will get your business divided 50/50 in any situation between you and your spouse.
Ex Involved
It is essential to realize that with the extra shares, your ex will also gain more power in handling your business. If your divorce was far from amicable, you may expect your former spouse to take their revenge on your company. Or you may just have your spouse involved in day-to-day company events, which will distract you and poison your workday in general. So, you’d better find some way to eliminate your ex from your business to prevent unpleasant consequences.
Change of Focus
Your business will suffer from you being involved in the divorce as well. Being busy with papers gathering, hearings attending, and agreements making, you will pay less attention to your business as a result. Mind to replace yourself with a reliable co-worker so that you can concentrate on the divorce process without any losses for your company and go back when you are ready.
How to Protect Your Business through Divorce
The combination of divorce and business ownership can lead to unpleasant aftermath for a business and its owners. This makes it necessary to protect your business whether you see the divorce on the horizon or are hundreds of percent sure of the trustworthiness of your marriage. Check out the measures you can apply to protect your business.
Prenup or Postnup Agreement
If you own a business when getting married, it is strongly advised to settle a prenup or postnup agreement before or right after the marriage, respectively. It doesn’t mean you don’t trust your partner; it shows that you care about your business and peaceful relationships no matter what.
In your prenup or postnup, it is vital to define the following things:
- assign the business or its shares to personal or communal property;
- define the share your spouse is going to own (if any);
- establish the change of rights and powers if the value of the company changes.
Create a written agreement only. Any oral ones will not have legal power in the end.
When an issue, such as divorce, arises, you are eligible to guide your actions and assets distributed according to your agreement and your spouse has no rights to object since they have agreed to it previously.
A Good Salary for Yourself
Many business owners assign themselves with a moderate salary. They prefer to put in all the income into the business involvement. Don’t do this. In the divorce procedure, your spouse may accuse you of not committing to household income enough and request the increased shares or rights in your company. So, give yourself a good salary and spend it on your marital life to avoid the mentioned problems later.
Business in the Trust
When you put your business in trust, you don’t own it directly, so it won’t be divided as your assets. But if you do this right before the divorce, your actions can be deemed fraudulent. As a result, the business transmission to the trust will be annulled.
Bailing Out with Other Assets
Getting a divorce when you own a business together will force you to make wise decisions so that you can preserve your business from any negative impacts from your ex. A good choice is to bail out with any other considerable assets. This means that you, for example, pass all the rights for a marital house to your spouse while they hand on all their rights for the business back to you. Pick out something that is of high importance for your former partner and come to a mutually beneficial agreement to save your business in the end.
Delayed Payments Agreement
When you get a divorce with a business involved and have to pay a decent sum due to the divorce settlement, it doesn’t mean that you have to sell your shares or the whole company to oblige. You have a different way out if you are good at negotiating. Create a delayed payments agreement so that you can pay off the settlements in chunks to save the business and finalize your divorce peacefully at the same time.