You built your company with your own blood, sweat and tears. You also spent a considerable amount of money to get it up and running. Perhaps you brought in a partner or two, and things have been going smoothly, gaining momentum and turning a profit.
Then you got married. While the fate of your business was probably the last thing on your mind when you took your vows, you may be wondering now if you have placed your hard work in jeopardy by tying the knot. What will happen to your business if you and your spouse divorce? How can you save your company from the damaging consequences of asset division?
Proactive steps to protect your business
Preemptive measures may include a prenuptial agreement that outlines the business assets before the marriage. This document should also include your spouse’s waiver of any claim to the business if the marriage should end. Another precaution you can take is to include the option for your partners to buy out your share of the business in case of divorce. By doing this, you prevent your spouse from taking over as a partner if a divorce order gives her your share of the business.
With or without these documents in place, it is a highly recommended practice to keep your business as separate from your personal life as possible. For example, some ways to protect your business from inclusion in property division during divorce include:
- Keeping all of your company’s accounts and assets separate from your family budget
- Not hiring your spouse to work in the company
- Not soliciting business ideas, advice or assistance from your spouse
- Keeping a log of your spouse’s lack of connection to the company
- Paying yourself a fair salary
By giving yourself a decent paycheck, you can avoid your spouse’s claim that the company owes her the money you would have earned. This claim may place the business back on the table during asset division.
What happens if I have not prepared my business?
If divorce is imminent in your life and you have not taken these steps, you will likely need professional advice to minimize the risk to your business. Your company will need to be valuated so that you and your spouse can divide it fairly according to Texas asset division laws. If you and your spouse are unable to come to an agreement about the value of the business, you will need someone to appraise the company’s worth.
A Board-Certifed Expert Family Law attorney with access to forensic accountants and other experts may prove invaluable. Having an attorney who is skilled in protecting the rights of divorcing business owners may mean the difference between losing your business and business as usual. Such an attorney can also assist you if there is still time to create a pre- or postnuptial agreement or if you need to revise your partnership agreement to afford greater protection in case of divorce.