Divorce is both a mentally and physically challenging situation. Just as you would like to pay for health and other types of insurance to protect your family, it is equally important to lay down some barriers that will help protect your business as well. The problem in such cases is that the spouse is directly or indirectly involved in the building and running of the business. Therefore, their demand for a share is expected. But if you think that your money or business will be handed over in the wrong hands, you can surely follow some tips to prevent that from happening. These tips are not an alternative to a divorce attorney. So, hire one.
Register The Business As A Separate Entity
Forming a separate business entity or placing the business in a trust takes away your ownership and puts it in the ownership of a separate entity. This means that your spouse cannot ask for equal distribution of wealth when you simply do not own the business and the properties.
This is why you might have observed celebrities and other successful personalities placing or investing their money in trusts to avoid paying their spouse. However, one thing you need to keep in mind is that you should place your business in a trust or form an LLC corporation before the divorce.
Plus, you should not use the same means to pay for your business expenses else your business will also be considered a marital asset even though it is a separate entity. This strategy of forming a separate business entity or placing the business in a trust is more effective before marriage. It can still be a helpful strategy after marriage as well but before divorce.
Utilize Marital Agreements
Another important tip you should consider is marital agreements. If the couple has signed a prenuptial or postnuptial agreement that states which assets will be divided then your business may be protected.
This means that the couple cannot approach the court for equitable distribution of wealth as it will be distributed according to the agreement that they both have signed. In addition to that, the couple upon divorcing can set some conditions and come up with a property settlement agreement that defines their rights, interests, obligations, etc. after divorce.
The agreement will specify which spouse will receive which assets once the divorce is finalized. That said, if you observe that your relationship with your spouse is not heading in the right direction, you should consider signing a prenuptial or postnuptial agreement.
This will help establish that your business is a separate property and will remain so even after the divorce. Another thing you need to keep in mind is that your spouse may not enter into such an agreement when the relationship is already bitter. So, you should try to make them sign the agreement before getting married.
Distance Your Spouse From The Business
If your spouse manage any part of the business or the business pays salary to the spouse, then the business will most likely be considered a marital property. If your spouse is not linked to the business, it is best to keep it that way to avoid future conflicts and distribution.
It might sometimes be a bit tempting to hire your spouse to save some money paying for hiring an employee. But, later down the road when things turn ugly, it could turn into a big issue. As soon as you find out that the relationship is not the same, you should try to erase them from the business.
The longer the spouse remains linked to the business, the higher the chances of them being entitled to a portion of the business.
Negotiate With Other Assets
Negotiating with other assets is another way of protecting your business in a divorce. Your business is going to be the first thing they will come after during the divorce proceedings. In such a case, you should try negotiating with other assets.
For instance, if you have a house, car, or anything else, you could offer them such things and retain full ownership of the business. It might hurt a bit to sacrifice the house you paid for with all your hard work and effort but a small price to pay for retaining the business. Have a family attorney Fairfax VA on your side to strike a good deal.
Get A Competitive Salary From The Business
Most business owners tend to take a low salary from the business or invest all the profits back into the business for better returns. They also think that they might be able to tell their non-business owner spouse that the business is going to be at a loss and they can’t afford to pay for the expenses.
While you may think it is a good strategy to protect your business during a divorce, it’s not if the spouse heads to court. The court will demand all the legal documents and will dig deep into the business. Sooner or later, you will need to showcase all the profits and expenses, giving it all away to the spouse to take.
To prevent that from happening, you should pay yourself a competitive salary from the business. This way, they can’t make an argument that they did not receive a portion or any benefit from the business, which makes them entitled to a portion of the business.
Do Not Lie About The Figures
If your divorce case is being handled by the court, do not think you can lie your way out of it. As mentioned earlier, the courts can easily dig up information they need and might even favor your spouse if you are caught lying. Instead, you should exercise your rights within the legal boundaries and not hide or manipulate the reports.
There have been many incidents in the past where business-owning spouses have deliberately tried to fool the court only to end up giving up a majority of their business. This could be a hefty price to pay. Therefore, speak and present the truth and ask your lawyer to negotiate for other things than the business.
Do Not Show Off
It is often seen that business-owning spouses tend to spend on expensive business trips, shopping, and traveling to make their non-business-owning spouses jealous. While it may serve your anger and hate for them, legally it could cost you big time.
On one hand, you wouldn’t want any portion of your business to be touched by your spouse, on the other hand, excessive spending will make their case even stronger in the court. They can make a case that your business is doing well and you can afford to hand over a portion of your business to them in court. This might influence the judge as well and you could be left with nothing but to give it up.
Conclusion
Protecting your business during a divorce can be a tricky task. You should be smart and exercise your options before getting married. But if you are left with limited options, you should consider the tips mentioned above. And since your business is in question, you should hire a competitive divorce lawyer Fairfax VA who can negotiate the best deal for you.
