Divorce is difficult under any circumstances, but it can become significantly more complex when one or both spouses own a business.
It’s critical to take steps to protect the company during the divorce, particularly if you plan to keep the business.
Separate business and personal finances
One of the most important things to remember is that you should keep business finances completely separate from personal finances. This provides a clear dividing line between the two. Commingling funds, which includes using your business account to pay a personal bill, can make it hard to prove that the business is a separate entity.
Know how your business is classified
The classification of the business will determine how it’s handled during the divorce. If the business is considered marital property, it will be handled during property division. There are exceptions if there’s a prenuptial agreement that covers the business. Some factors that determine if it’s marital property include how the business was funded, when the company was started and which spouse contributed to its growth.
Avoid making sudden changes
You shouldn’t make any sudden changes to the company once the divorce is filed. This includes altering payroll, transferring ownership or restructuring the company. These could be construed as attempts to hide assets or reduce the value of the business. Keeping operations consistent and maintaining accurate and comprehensive records can help protect the company.
Consider a buyout or trade
If the company is considered a marital asset, you may have to determine how you can keep full ownership. This may include buying out your ex’s share of the company or trading off assets of equal value.
Remember that you have to protect yourself and the business. Working with someone familiar with these matters may be beneficial.
