You have probably heard the horror stories about people who go through a separation and lose everything, including their business. However, that does not have to apply to you. With the help of a strong divorce attorney, you can protect your business and other assets.
How Your Divorce Attorney Can Protect Your Business During a Divorce
A divorce is an emotionally and mentally draining process, but it shouldn’t have to drain your finances as well.
What is a Spouse entitled to during a Divorce?
During a divorce, your ex-spouse can claim part or all of your assets, including any shared homes, vehicles, and more. Often, this includes a business.
However, that does not mean that your spouse is automatically entitled to half of your business. The split of your assets is determined by several factors, including when you founded the business, whether your spouse helped you run the business, any financial obligations you have toward your spouse, as well as any premarital agreements.
How your business is classified will determine whether or not your spouse can have access to it. The state of California divides property into marital property, which spouses share, or separate property, which only one spouse owns. Your business could be classified as marital property if you founded it during the marriage since California is a community property state.
Your divorce attorney can help you classify your business so that you fulfill your legal obligations while protecting as much of your personal property as possible. They can also help mediate a solution to run the business if it is deemed marital property. You and your ex-spouse can continue running the business together if you have a strong working relationship, or you can buy them out.
A drastic option is to sell your business and split the profits with your ex-spouse. If you want to keep the business and are having trouble agreeing on an even split, you have a few other options for protecting your business.
Ways to Protect Your Business
You have a few options for protecting your business during a divorce or marriage, which an attorney should help you draw up.
The Valuation Process
During a separation, you will need to evaluate your assets so that the state can divide them equitably. If you do not get a fair and accurate business valuation, you could face legal penalties or wind up losing more of your business than you should. A good divorce attorney can perform the valuation themselves or connect you to someone who can.
Prepare a Marital Agreement
If you already have your business and are planning to get married, creating a prenuptial agreement will protect your assets in the sad eventuality of a divorce. Even if you are already married when you start your business, you can sign something called a postnuptial agreement. This clearly outlines your obligations toward your spouse and whose property the business is.
Always retain a divorce attorney when preparing a marital agreement of any kind. Judges will strike down agreements if they deem that one or both parties did not have access to enough legal counsel, and an aggressive lawyer for your spouse may attempt to challenge your agreement.
Marital agreements require a little foresight but could be crucial in protecting your business after a marriage ends.
Placing your Business in a Trust
A trust is one method that business owners use to protect their assets during a divorce. A trust is a legal entity that holds on to an asset, such as a business, and operates it for another person’s benefit. When you place your business in a trust, you technically don’t own it anymore so it cannot be classified as marital property.
However, when you place your business in a trust, you also lose some of the control over it. This is an option that does not fit every circumstance. As with everything, check with your attorney before adjusting the legal circumstances of your business as they can advise you the best.
What your Divorce Attorney can do for You
An attorney is a valuable resource that anyone should have by their side when going through a divorce.
This advice is particularly important for business owners, who could lose their life’s work and livelihood through a legal mistake.
Before your separation or even before marriage, your attorney can help you prepare marital agreements that protect your assets in case the marriage breaks up. During a separation, an attorney can properly evaluate your business and advise you on the best way to protect it, whether that includes buying out your spouse or even placing your business in a trust.
Before going through divorce proceedings, you should get an attorney you trust.