Does divorce mean your business is done for?

On Behalf of | Mar 20, 2019 | Divorce |

Having a business and being married are two aspects of life that can bring joy and turmoil. In either situation, a chance exists that the endeavor will not work out. While you may not have obvious steps to take with your business to protect your marriage relationship in the event of a serious business issue, you can make efforts to protect your business in the event of divorce.

If you owned your business before tying the knot, you may have created a prenuptial agreement to protect your business should the marriage come to an end. Of course, if you started your business after you married or simply did not create a prenup, you are not out of luck.

Benefits of a prenuptial agreement

If you created a prenuptial agreement, you may have included useful terms to protect your business, such as the following:

  • Ensuring that your business remains separate property, meaning a California court will not divide it during divorce
  • Limiting your spouse’s share to any value the business gains after marriage, which you may consider marital property
  • Creating a buyout agreement if you and your spouse both own and operate the company

Of course, the terms you included are likely specific to your business, and hopefully, each term clearly dictates how property division proceedings will address certain items.

Other protective measures

As mentioned, if you did not create a prenuptial agreement, you still have options for protecting your business. You can even address the possibility of divorce in your business-related documents. For instance, you can specify terms that indicate that your company cannot be transferred to another party if you divorce. In such a case, your spouse may instead obtain a cash award instead of a portion of the business.

Additionally, the manner in which you keep your business records could also help protect your business. Recording any cash transactions made, paying yourself a salary that coincides with market standards, keeping your business and personal expenses separate, and other similar actions can help reduce the chances of your spouse claiming entitlement to business assets.

Having help

A lot is a stake when you own a business and face a divorce. As a result, you certainly want to do what you can to avoid major upset to business operations. In addition to taking protective measures yourself, you can also work with an experienced attorney to come up with strategies for mitigating negative effects to your business during this time.