High-asset divorces threaten the stability of a business if handled poorly. Business owners must prepare and take strategic actions to protect their interests during a divorce. Several strategies help keep a business intact and minimize financial loss during this challenging time.
Establish a prenuptial or postnuptial agreement
A prenuptial or postnuptial agreement protects business interests effectively. These agreements clearly outline how to divide business assets in the event of a divorce. Prenuptial agreements are established before marriage, while postnuptial agreements are created after marriage begins. Both agreements prevent lengthy disputes and help safeguard the business.
Separate business from personal finances
Separating business finances from personal finances is critical. Business owners must avoid using personal funds for business expenses and vice versa. Creating a distinct boundary between these finances keeps the business separate property. Proper documentation and financial records make it easier to argue that the business should remain undivided.
Pay a fair salary to the spouse
If a spouse works for the business, paying a fair salary helps protect business interests during a divorce. A fair salary shows that the spouse receives compensation for their contributions. This reduces arguments for a larger claim on the business in the divorce settlement.
Consider a buy-sell agreement
A buy-sell agreement serves as a valuable tool in a high-asset divorce. This agreement allows co-owners of a business to purchase the interest of another owner if certain events occur, such as a divorce. Having this arrangement in place stops a spouse from acquiring ownership interests in the business.
Navigating a high-asset divorce involves complexity, especially when it involves a business. Taking proactive steps makes a significant difference in protecting business interests and ensuring a smoother process.
