If you own a business (or are about to start one), you need to think about the possibility of divorce and how that could damage your enterprise. There are ways to protect your company — but the sooner you act the better.
If you’re nowhere near a divorce right now
If you’re happily married or not married at all, you still need to divorce-proof your business as much as possible. You can do that through several different means, depending on your situation:
- Get a prenuptial agreement — Before you tie the knot with someone, insist on a prenuptial agreement that protects your business. If your intended spouse balks, you can consider an agreement that phases out over time or offer something else that will make the agreement more acceptable.
- Get a postnuptial agreement — If you’re already married when you start your business, a postnuptial agreement can function the same as a prenup — and be just as effective. Just make sure that it’s reasonable and fair. A family law attorney can help you make sure that any agreement is enforceable.
- Create a buy-sell agreement — If you’re going into business with your spouse, a buy-sell agreement can set the terms for what happens if you do split up. It can give the more active spouse the right to buy out the less-active spouse’s share, limit who your spouse can sell to and so on.
If you’re already on the cusp of a divorce
If you think a divorce is coming, you need a different strategy:
- Get a fair valuation of your business — That way you have a strong point from which you can negotiate with your spouse.
- Be willing to sacrifice something else — If you play your cards right, you can probably keep your entire business if you’re willing to give up something of equal value. Come to the negotiating table with that in mind and consider handing over the family home, collectibles or retirement accounts if you want to retain the business.
Hopefully, you’ll never have to weather this particular storm. If a divorce does happen, however, you’ll handle it better if you know your business is protected.