When business owners divorce, not only are they facing drastic changes in their personal lives, they are also facing major disruptions in their businesses. The time and energy required to finalize a divorce has a major impact on one’s ability to run a company.
Not only may business-as-usual suffer during the divorce process, an owner risks losing control of the company he or she worked so hard to build. Following are some tips for protecting one’s business before and during a divorce.
Do not mix business with pleasure
It is vital to keep business and personal records, money and actions separate from each other. Commingling personal and business income and expenses may lead to a piercing of the corporate veil, just as it can be in an IRS audit or a corporate lawsuit. Pay yourself an established salary rather than taking cash whenever it is wanted or needed for home or personal expenses.
Forfeit personal assets, if necessary
In order to keep control (and future income) of the business, it may be necessary to sacrifice personal assets during the divorce settlement process. Allowing a spouse to keep the family home can keep his or her fingers out of the office and the corporate boardroom. While giving up retirement benefits or other valuable assets may hurt in the short run, the long-term payoff may be well worth it.
Set up business loan payments
If a business owner is unable to buy off a soon-to-be ex-spouse in a lump sum, it may be advantageous to make payments on a loan against the business assets. Although payments may hurt the bottom-line of the business in the short-term, control over the business and its assets stays with the owner.
Fortunately, Texas businesses are rarely sold during the divorce process. To help make sure that does not happen, consult an experienced high-asset divorce attorney before filing or immediately after you have been served.