If you own a small business, you’ve likely worked hard and sacrificed valuable time, money, and energy to build your business. You probably never expected that you would divorce, but now you and your spouse have decided to split up. Now you have numerous questions and concerns about how the divorce will affect one of your most important assets.
Will Your Business Be Affected?
When small-business owners divorce, many factors must be considered to determine what will happen to business ownership after the divorce, including:
- When was the business formed? If the business was formed before the marriage, it may not be considered marital property. Even if you formed the business before entering into the marriage, it could still be considered a marital asset if your spouse was involved in its operation.
- What is your spouse’s marital interest? Your spouse’s marital interest can be determined based on several things, including your spouse’s role in the business, the amount of time he or she contributed to the business operations.
- Was documentation in place that established the ownership interests? Small-business owners may avoid these problems by having a clear shareholder agreement in place. The easiest way to avoid problems with ownership is to establish clear definitions in a shareholder agreement during initial business formation.
Tips for Protecting Your Small Business in Divorce
Those are just some of the factors for how divorce affects small-business owners. For help with your specific business situation and the process of equitable division of assets, speak with an experienced attorney.
Other things you can do to protect your business include:
- Sign a prenuptial agreement designating your business as separate property as well as any appreciation or increased value of your business.
- If you do not sign a prenup, consider signing a postnuptial agreement soon after marriage.
- With an LLC, corporation, or partnership, you can create a buy-sale, operating, partnership, or shareholder agreement with a provision in place stating what happens to the business in the event any owner divorces. Note, though, that while this may provide some security to partners in a business, it has no effect on the division of a divorcing partner’s interest.
- Ensure finances from the business are kept separate from marital finances.
Work with a Skilled Advocate to Protect Your Assets
Friedman & Friedman PLLC, Attorneys at Law can assist you in protecting your business assets during divorce. Our New York lawyers utilize their knowledge and experience as an invaluable advocate for our clients and will do everything we can to protect your best interests.
Call our firm today at (914) 873-4410 to set up an appointment with our team.