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Is your business in trouble if you get divorced?

If you own a business and are considering divorce, you must evaluate your situation carefully before moving forward. Depending on the specifics of your circumstances, the property division negotiations with your spouse may involve the business, which your spouse may claim is part of your marital property to divide.

While each business owner's divorce presents unique challenges, the dangers that divorce poses to a business are difficult to overstate. In simple terms, the law treats businesses the same way it treats other, much simpler, assets like real estate and savings accounts or investments. If your spouse does have a legitimate claim to some portion of the business, you may face some difficult decisions in order to keep the business intact while your marriage dissolves.

Don't waste any time developing a strong divorce strategy, especially if you have customers, clients or employees who depend on your business for part of their own livelihood. In many instances, owners who fail to properly prepare and prioritize the business cannot keep it afloat until the divorce finalizes. If you want to save your business from your divorce, then you must clearly set your priorities and prepare for some potentially painful sacrifices.

Review your protections

If you planned for this possibility and created a prenuptial agreement, then you may have a much easier time resolving your divorce without harming your business. However, the mere existence of a prenuptial agreement does not mean that you are in the clear. If the prenuptial agreement does not properly protect the business, or if it is weak to legal challenges, then your spouse may still seek a portion of the business's value.

It is also possible that your spouse does not have a reasonable claim on the business even if it is not protected through a prenuptial agreement. You may have grounds to reasonably claim that it is separate property if your spouse has little or no involvement in the operation of the business and little or no knowledge of its inner workings.

This is not an easy case to make, but the more separation you demonstrate between your spouse and your business, the more likely a court is to agree with you. Keeping impeccable records and clearly separating your personal and business finances will also help you make this distinction visible.

Consider what you are willing to sacrifice

If your spouse does have a strong claim to a portion of the value of the business, then you may have to offer them other assets or negotiate ongoing payments to avoid sinking the business. A good place to start is with a professional business valuation. A thorough valuation analyzes the business carefully and lays out exactly what it is worth and why. This ensures that you are working from a common, neutral understanding of the business's value when negotiating a settlement with your spouse.

If you have assets that you can offer your spouse to keep them away from the business, it may be a good trade, depending on the profitability of the business. Once you understand the legal tools you have available, you can assemble a strong legal strategy that keeps your rights and priorities protected, allowing you to focus on your personal needs and the business you proudly own.

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