Coates & Davenport, P.C.

Don't let divorce destroy your business

When divorce is imminent, you may suddenly look at your life very differently. Everything that you have is something you could potentially lose, from your home to your children. For business owners, divorce presents additional challenges and worries.

Having a clear understanding of your priorities and a strong legal strategy can help you protect your rights and business as you work to negotiate a beneficial divorce settlement.

Many business owners are surprised to learn that their business, or stake in a business, qualifies as marital property—meaning that a soon-to-be ex-spouse may claim a portion of its value during property division. If you hope to keep your business afloat during and after your divorce, you need to be strategic.

Identify your options

In most cases, the best protection for a business is a prenuptial agreement. If you had the foresight to protect your business with a prenup, then you should review this document carefully. Some individuals who create prenuptial agreements are disappointed to learn that an agreement doesn’t hold up in court.

If you do not have a prenuptial agreement, then your business is probably on the table as an asset to divide during divorce. If your spouse has no to little involvement in the business, you may have grounds to argue that a business should not qualify as marital property. This requires keeping impeccable records and demonstrating clear separation between your business and personal finances.

Understand your business's value

You may not be able to get around offering your spouse a portion of your business's value, especially if they were or are involved in business operations. In these circumstances, it is generally wise to hire a financial professional to obtain a business valuation.

Valuation helps you establish an accurate assessment of your business's worth, giving you a clear picture of what your spouse may ask for and a framework for reaching a fair deal. If you do not have the assets to buy a spouse out of his or her stake in a business, you may need to work out a structured compensation payment plan.

With careful planning and preparation, business owners who face divorce can protect their business, preserve their financial security and move forward to the next chapter in their lives. 

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