Not all marriages are made to last, and sometimes couples might resort to a separation or divorce. Statistics show that divorce rates have climbed to 2.3 per 1,000 in recent years. Among these are couples owning businesses together.
If you find yourself in the midst of a divorce and you own a business with your spouse, you might be worried about what will happen to your company. After all, you’ve likely poured your heart and soul into building it up.
The good news is that there are ways to protect your business during a divorce. With careful planning, you can ensure that your business comes out unscathed. Here are some things you can do to protect your business interests.
Talk it out.
The first and most important thing you can do is to talk to your spouse about what will happen to the business in the event of a divorce. It’s the easiest and most amicable way to face the issue, saving you time, hassle, and money in the long run.
Ideally, you should be on the same page about what you want and agree on who will get what. When you take the time to communicate and come to an agreement, you can avoid a lengthy and costly legal battle.
If you’re uncomfortable discussing the topic with your spouse alone, you can always consult with a mediator to help you navigate the conversations. This person will help you communicate effectively and reach an agreement that works for both parties. In doing so, you can avoid the potential for a messy divorce.
Create a written agreement.
Suppose you and your spouse mutually agree on what will happen to the business. In that case, you can create a written document detailing how the business will get divided in the event of a divorce.
This document is also known as a postnuptial agreement or an antenuptial agreement (if created before marriage). It’s a legally binding contract that can help prevent future disagreements and disputes.
Be sure to consult with a qualified divorce lawyer before creating any agreements. This way, you can be sure that the document is ironclad and will hold up in court if necessary.
Get a valuation of the business.
Once you’ve decided who will get what, the next step is to get a professional valuation of the business. This step will help ensure that the division of assets is fair and equitable.
A business appraiser will look at the company’s financials, market value, and prospects to determine its worth. This process can be costly, so factor it into your budget. By getting an accurate valuation, you can be sure that your business gets divided fairly.
However, note that the valuation of a business is not always cut and dry. If unsatisfied with the appraiser’s report, you can always get a second opinion. It’s essential to be thorough in this process to avoid potential disputes.
Keep good records.
Keeping good records is essential if you own a business with your spouse. It will be handy if you ever need to prove your ownership stake in the company. Keep records of all financial transactions, including invoices, receipts, and bank statements.
You should also keep records of any personal investments you’ve made in the business. That includes loans you’ve given or anything else of value that you’ve contributed. These records will be necessary for divorce proceedings.
It’s also a good idea to keep personal and business finances separate. This way, there’s no confusion about who owns what. If possible, open up a separate bank account for the company and deposit all business income into it. This move will make tracking expenses easier and help understand the business’s financial situation.
Consult with a divorce attorney.
When going through a divorce, it’s essential to have a qualified family attorney on your side. This person will help you manage the process and protect your interests. They can also offer guidance on dividing your assets, including your best options.
In addition, a divorce attorney can help you understand the tax implications of divorce. This part is essential because dividing your assets can significantly impact your taxes. Be sure to consult with an accountant as well to get a complete picture of the financial implications of divorce.
When you’re well-versed in the process, you can make informed decisions about your future. Thus, allowing you to protect your business as much as possible.
The above are some tips to help you manage your business during a divorce. By taking the time to understand the process and preparing in advance, you can protect your interests and make the most of a difficult situation. So, don’t hesitate to try these tips to help you get through your challenging period.