While everyone who gets married wants to believe that their union will last forever, four out of every 10 first marriages in the United States end in divorce.
Ending a marriage can have devastating personal and emotional consequences for everyone concerned, but it can also have significant financial implications, especially if a business is involved.
How are businesses divided in a divorce?
It’s becoming more common for business owners entering into marriage to draft a prenuptial agreement in case of divorce. However, many businesses are started later. Even without a prenup, owners can take steps to ensure a fair division of property, such as:
- Ownership: Draft documents showing you as the sole owner of the company and specify that the business cannot be transferred if a divorce happens. Instead, a specific cash award may be named.
- Funding: Keep clear records of where the money came from for starting the business, such as were premarital or marital funds used for buying or renting space and other startup costs?
- Separate personal from business: Do not intermingle your company’s accounts with you and your spouse’s funds as it could create accounting headaches and hurt your chances for a fair settlement.
- Track cash payments: If there’s a cash component involved in your business, make sure detailed records of all transactions exist.
- Pay yourself the going rate: Paying yourself less than the market standard in salary can have drastic and negative consequences when your spouse’s support payments are determined.
- Pay your spouse: If your partner works at your company, pay them for their services, regardless of how significant that contribution may be. Otherwise, they may receive a higher percentage of the company’s value.
Consider a postnup
Many people get married without a glimmer of an idea that they will one day own their own business. For many of those people, a postnuptial agreement is becoming a common step in deciding how that asset will be distributed in the event of divorce. An experienced family law attorney here in Illinois can answer your questions about postnups as well as other steps you can take to protect your business.
