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How can you protect your business when you divorce?

On Behalf of | Aug 4, 2021 | Family Law

Most Americans are opting to either never marry or to do so at a later age than they once did. Many do this in part to focus on their careers, including growing their entrepreneurial ventures.

It has become increasingly common for people to have established businesses when they get married. Let’s look at some things you can do to protect your business in case the marriage ends in divorce.

The value in drafting a prenuptial agreement

Most spouses don’t get married with the expectation of their union not working out. While you and your spouse-to-be may be completely in love with one another today, that may not always be the case. You owe it to yourself to put a prenup in place to ensure that you’ll be able to keep what you brought into your marriage (including your business) in case things take a turn for the worst.

Why you may want to consider incorporating

Incorporating your business is another way to minimize the chances that your spouse will stake a claim to your company and its profits in a divorce. Different incorporation structures offer different legal protections. In many cases, you can include clauses in your partnership or operating agreement that may shield your company from your spouse taking control of it or staking claims to its profits.

You’ll want to ensure that you don’t commingle any profits your company makes with your marital funds, though. Doing so could give your spouse a right to stake a claim to them.

Your salary matters if you divorce

It’s critical that you pay yourself a competitive salary if you run your own business. You should also treat your spouse like an employee in terms of paying them a salary for any work they perform for your company. Doing the latter minimizes your spouse’s chances to stake a claim to your company when they try to negotiate a divorce settlement.

Dividing property is often one of the most complex aspects of a divorce. You’ll be thankful that you took measures now to protect your interests if you decide to divorce down the line.