How to Protect a Business in Case of Divorce

It's no secret that the vast majority of entrepreneurs put in long hours to build a business. Unfortunately, 60 or 70 hour workweeks can be hard on a marriage and that's why things between the couple often start to unravel. The next thing the business owner knows, their spouse is filing for divorce.

This scenario is all too common, and with around 50 percent of first marriages ending in divorce, it makes sense why a marriage where the couple hardly sees each other would fall apart.

If you've worked hard to build a business and you want to ensure that it's protected in the event of a divorce, the best way to protect your business is to enter into a prenuptial or a postnuptial agreement which clearly outlines how the business would be valued and/or distributed if you were to get a divorce.

Strategies to Protect a Business

If you built a business before the wedding, be sure that the prenup states that it is separate property that is owned solely by you. Or, if you married in the last several years and didn't secure a prenup, then get a postnup – as soon as possible. It can be useful in defining the business as separate property.

Here are other strategies that can help protect your business in the event of a divorce:

  • Place your business in a trust. This way it isn't counted as a marital asset (as long as you don't personally own it).
  • Create a buy-sell agreement that defines what would happen to business if you get a divorce.
  • Get a whole-life insurance policy that builds cash value that you can liquidate to buy your spouse out of their share of the business if necessary.

Do you have more questions about this topic? If so, call the Los Angeles divorce lawyers at Claery & Hammond, LLPto get your questions answered in a free consultation!