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Protecting your business in case of divorce

Whether you are in the process of starting a business or already own one, thinking about how you will protect it in the event of a divorce is a critical – but often overlooked – component of any long-term business plan.

To that end, there are a host of proactive steps that you can take in order to protect and preserve your business assets if from a potential divorce.

Structuring a new business

At the outset, when creating your business  you can organize and structure it in such a way that it will be protected. For example, when several people start a business together, they can include provisions in a business’s organizing documents that requires a “buy-out” of the divorcing partner’s ownership interest. That way, the business itself, and its partners,  are not directly affected by a divorce of one of the partners.

Alternatively, if a person is the sole owner of a business, the organizing documents can often state that in the event of a divorce, the business cannot be divided. These, and other, options are available depending on the manner in which the business is organized, and your unique circumstances.

Pre- and postnuptial agreements

Another approach is a prenuptial or postnuptial agreement  regarding an existing business. Under these agreements between spouses, or soon to be spouses, a couple can agree that the business will not be considered marital property; the manner in which the business will be split in the event of a divorce; and/or any number of other creative (and practical) ways that a divorcing couple can treat their business assets in the event of a divorce. For example, if a couple owns a business together, they can agree to sell the business upon a divorce, or agree that one spouse has the right to  buy the other out.

Another potential option would be an agreement that specifies what each spouse is entitled to upon their divorce, and how the business will be valuated – including whether its value is calculated from the date of the marriage, or some other point.  A provision like this can not only protect both interests in the business, but can also prevent the long and expensive process of arguing over how to value and divide the business itself.

If you have questions about how your business will be divided during a divorce, or how you and your spouse, and/or future spouse, might agree to divide your business in the event of a divorce, contact Bashian P.C.

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