Many people are naive to the realities of divorce when they are getting married. For those who own a business, this is dangerous because they could end up losing the things that they have worked hardest for. Statistics show that 52% of all first marriages end in divorce with the percentage climbing for multiple marriages as 70% of all third marriages end in divorce.
If your marriage should end in divorce the one thing that you will have left is the business that you went into the marriage with, right? Wrong! That’s right if you do not take the right steps to protect your business then it is likely that you could end up with your ex-spouse as your business partner.
Understanding Separate Property
It is important that you understand the different types of separate property. This is a general outline but these are things that can vary by state. A business is considered to be a piece of property in the event of a divorce.
Questions to Ask to Determine Property Type
- Was the property owned prior to marriage?
- Was the property part of an inheritance that was given to just one person?
- Was the property a gift that was given to one spouse by a third party (the third party can not be the other spouse in this case)?
- Was the property obtained as part of a personal injury judgment?
If you answer yes to any of these questions the property could be considered just one spouse’s but it could also get lumped together as marital property if it was not protected the right way legally.
Understanding a Prenup
Before you get married if you or your future spouse own property or a business then it might be a good idea to sign a prenuptial agreement. “Using a prenup to protect your business in a divorce can be necessary,” according to the site nationalfamilysolutions.net. It is essential that both parties have their own lawyer for the prenup.
The Following Are Tips for Your Prenup
- Oral prenups are not legally binding agreements so make sure that you get these things in writing.
- The prenup should be signed months before the wedding, shortly after engagement and there should be no coercion involved with the signing of the agreement.
- Every single asset that you have should be disclosed in the prenup agreement.
- The prenup must be fair, even if you are the only working and making a considerable amount of money from your business, you will have to offer them something in the prenup to make it fair.
- There should be a witness (the best choice is a judge) when you are in the process of drafting the prenup.
That does not mean that the prenup is always going to work and these are usually because there was a business decision made that affected the prenup.
Final Tips to be Protected with Your Prenup
There are a few things that can help you keep your business protected with a prenup.
- Always make sure that you are paying yourself a salary that is competitive.
- Keep your marriage and your business separate. Do not have your spouse be involved in your business in any way.
If it seems that your business is in doubt then you should be willing to offer your spouse more of the marital property to try and appease them. There is a lot of additional information that you can learn about how to protect your business when going through a divorce.