Divorces are never rosy, it's always a turbulent period for most couples and it could be harder when one party's business is about to be drowned in the mess.
Imagine working really hard and making all those sacrifices to build that business only for it to get entangled in a messy divorce. It’s a nightmare.
However, it doesn’t have to always be like that. With proper planning ahead, you can save your business from the effects of divorce.
Here are five ways you can protect your business assets in a divorce, regardless of whether you started the business before your marriage or during your marriage.1. Pre-nuptial agreement
This might not seem like a sexy way to start your married life, it is however one of the very best and least expensive ways to protect your business assets in the event of a divorce.
A prenuptial agreement
is a financial contract both parties sign before their wedding which details what they will be entitled to upon divorce.
This step could be taken either before the relationship, or during the relationship as it will help you understand how the assets will be shared in the event of a divorce.
Avoid oral prenups, put everything into writing. It should be done voluntarily without any form of coercion and be sure there are witnesses to attest to it.
If the prenup is not carried out, there's a possibility that your business assets will be split 50/50 and you probably do not want to be co-CEO of your company with an ex you got into a messy divorce with. 2. Do not involve your spouse in business matters
Not being able to get assistance from your significant other in the most important aspect of your life might not be the easiest thing to do but it's the best, as far as divorce is concerned. Disregard the tax benefits and handle your business alone.
Make it very clear from the onset so there'll be no claim from your ex that they contributed to the success of the business, and therefore deserve a share. 3. Develop a healthy relationship with your ex-spouse
If you speak to a divorce lawyer
they’ll probably tell you that the best way to ensure your business properties are protected in a divorce is to develop a healthy relationship
with your ex-spouse.
Being civil and honest could have a very great impact on the divorce procedures, something a messy legal procedure cannot pull through. 4. Transparency
Under no circumstance should you hide your business assets from your spouse. Make no attempt to transfer assets out of the business as such moves could be very fatal to your business assets in the event of a divorce.
Be very open about your finances prior to any divorce settlement, otherwise, the court will see it as a deliberate attempt to avoid your significant other's financial claims leading to more damage to your position before the court. 5. Put the business assets in a trust
This should be done long before the divorce comes to sight as it will enable you argue, at least in theory, that the assets are owned by the trust and shouldn't be counted as a part of the matrimonial assets.
The trust shields the assets from being divided but might probably still be used in calculating alimony reports.
Nobody plans on ending their married life in a divorce, but you have to be prepared for when it happens, so that you don’t end up losing everything you've ever worked for.