Splitting up is hard enough, but you absolutely don’t want your company to be destroyed by the end of your marriage. If you’re not careful, though, that’s a very real possibility. Below are six tips that business owners can use to protect their companies when assets must be divided.
1. Use a prenup
Perhaps the easiest way to protect your company is to have the foresight to sign a prenup before you get married. All it must stipulate is that your spouse gets no part of your company, even if he or she gets a portion of your personal assets. If you’re already married, it’s too late for this, though there are postnuptial agreement options you could consider.
2. Don’t co-mingle the assets
It’s tempting to take your personal money and use it to buy business assets, or vice versa. This is especially true at the beginning, when the business is small. Doing this just complicates the process, though, and makes it so your spouse may claim you spent his or her money on your company.
3. Don’t work together
Sometimes, couples like to team up and start a company together. This seems fun and exciting when you’re married, but it’s an utter mess when splitting up. You may want to sever those business ties before the divorce.
4. Give yourself a nice paycheck
The key here is that the court may try to take your business assets if they’re substantially higher than your family’s, to the point that your family was lacking assets, sacrificing them for the growth of your company. While your spouse may have been fine with eating mac and cheese every night while you were married and the money was funneled back into the company, he or she may want a cut of those assets during a divorce.
5. Have a valuation done on your company
Never assume you know what the company is worth. No matter what you’ve put into it, it could be worth far more or less, depending on factors like typical income, growth projections and other complex financial fluctuations. Get a valuation so it. Even if you do lose some capital or assets, it won’t be more than you should.
6. Sell ownership to raise money and buy your spouse out
It can ruin your business if your spouse is granted a significant portion of it and you don’t have the assets to buy him or her out. This can force you to sell entirely. To avoid that, you may want to consider looking for investors and selling an ownership percentage, maintaining overall control while buying out the portion that would have gone to your spouse.
The bigger the company, the more assets that are involved and the more complicated a divorce can become. Always make sure you know your legal options, your rights and how to protect yourself. and your company.