Jacquelyn S. Gonz, Attorney At Law Llc

Three ways to protect a business during a divorce

Entrepreneurs work extremely hard to build up their businesses. It takes months of preparation and possibly years to make huge profits. It helps to have a supportive partner or spouse to help you along the way.

However, family businesses take a massive hit when a couple decides to separate. It may destroy a business when spouses decide to fight over a business’s ownership. But what can you do to protect your company during a divorce? Luckily, there are three techniques owners can implement immediately.

Create a postnuptial agreement

You didn’t draft a prenuptial agreement before walking down the aisle; it doesn’t mean you can’t establish the division of your assets after the wedding date. In reality, you and your partner could create a postnuptial agreement, a legal document that states the property division in the case of a separation.

With legal documentation, Missouri courts typically adhere to the couple’s wishes on dividing the marital property, including small businesses. There are cases where a court may throw out a postnup due to unfair circumstances, so make sure you and your spouse agree on the terms of the agreement.

Keep family out of the business separate

If you and your spouse do not have a prior agreement, it is up to the courts to decide who gets which assets. Missouri relies on the concept of equitable division – where the judge splits the asset based on fairness instead of equality. The judge often weighs several factors before splitting any marital property, assets shared by spouses.

If you want to keep the courts of your business, you need to keep your company separate from marital property. Make sure you don’t use joint bank accounts for initial funding or hire on your spouse as a partner or even a manager. It will turn your company into a personal asset instead of a shared property.

Pay yourself a decent salary

It seems like an odd piece of advice. What does my salary have to do with dividing a business during divorce? The answer is everything. Many entrepreneurs try to pay themselves less money and invest the additional funds back into the business. Unfortunately, reinvesting in your business leads to a significant decrease in personal cash flow for you and your spouse.

Your former significant other may use that as an argument for why they are entitled to ownership in your company. They had to support you through that time and deserve a share of future profits. The best way to prevent this argument is to pay yourself a fair salary and help your family with that income.

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