Protecting Your Business in a Divorce: Tips for Business Owners

Navigating a divorce can present many problems, especially for the entrepreneur who has built a business. Divorcing a spouse is hard enough, but the thought of losing a spouse AND potentially losing a portion of your business can be overwhelming. This guide provides a resource for those who own a business and are considering a divorce.

Safeguarding Your Business and Financial Future

For business owners, getting a divorce can be very stressful. The thought of losing everything they’ve worked so hard for can cause extreme stress. However, with the right strategies, you can protect your business and financial potential. Some common concerns may include ownership rights as they pertain to the business, how to value the business, and how the divorce will impact your company’s operations. To address all these concerns, you must understand how to protect your interests.

Legal and Financial Considerations

Consider a ContractThe legal implications of divorce for business owners are extensive and require strategic planning. By properly planning for possible legal outcomes, business owners can effectively protect their business. While protecting your business is important, the main goal is to ensure a fair settlement in the divorce.

In Missouri, two types of property will arise in a divorce case: separate property and marital property. Separate property is typically that which was owned by a spouse before the marriage. Separate property also includes property obtained through inheritance or as a gift during the marriage.

It is important to note that if the value of the separate property increases during the marriage, that increase may be considered marital property and subject to division in the divorce. So, how does this pertain to business owners?

If a spouse owns a business in Missouri, the business may be considered separate property if it was owned before the marriage. But let’s say the business did not grow in value until the spouses were married, then it may be considered marital property. In this case, the value of the business would need to be determined, and the spouses would need to agree on how the business’s value will be divided.

Likewise, if the business was started after a couple was married, it may also be considered marital property.

One possible legal outcome in a divorce in Missouri when one spouse owns a business is that the spouse who owns the business will continue to own and operate the business, while the other spouse will receive an equitable share of the value of the business. There are different ways this can be achieved.

The best example used to achieve this goal includes a buyout by the spouse who owns the business. The spouse who owns the business would give the other spouse a lump sum to buy out their interest in the business. This can also be achieved through a payment plan.

Another legal outcome could be that the business is sold. In this example, the spouses would then divide the proceeds. This method may be necessary if the spouses can’t agree on a buyout scenario. However, if the spouses can work together, they may be able to reach an agreement that would allow the business to continue operating.

This method would minimize the impact on the operation of the business. It is important to note that spouses can get as creative as they want in their agreement. For example, their agreement could include a partnership agreement that defines ownership roles.

Below, you will find what we discussed in a more structured list of ways to protect your business.

Strategies to Protect Your Business

For business owners going through a divorce, the priority is often to protect their business. This challenge requires a strategic approach. Here are strategies that can help protect the business during a divorce:

1. Prenuptial and Postnuptial Agreements

A thorough prenuptial or postnuptial agreement can establish the ground rules for property division in the event of a divorce. In the context of business owners, these agreements should clearly outline the business’s ownership. A divorce attorney can help you draft an agreement that best suits you and your business.

2. Hiring a Qualified Divorce Attorney

A skilled divorce attorney who understands the divorce process and how it differs when businesses are involved can provide invaluable guidance throughout the divorce process.

3. Business Valuation

One of the most important aspects of divorce for business owners is determining a business’s value. Both spouses need an accurate appraisal of the company’s worth. A divorce attorney can provide advice to help you through the business valuation in your divorce.

4. Separate and Marital Property

You must understand the difference between separate and marital property to ensure a result that favors you. Commonly, a business established before the marriage may be considered separate property. Nonetheless, if the business grew during the marriage, a portion of those assets could be considered marital property, subject to division.

5. Buyout of Spouse’s Interest

Business owners can protect their business by arranging a buyout of their spouse’s interest in the company. This arrangement may involve a lump-sum payment or a payment plan over time. A divorce attorney can help you draft the contracts necessary to accomplish a buyout and assess the implications behind a buyout.

6. Alternative Dispute Resolution

It is important to note that divorces do not necessarily need to develop in a courtroom. You should also consider alternative dispute resolution methods. This may include mediation, arbitration, or collaboration (if you and your spouse are still on good terms). These alternative dispute resolutions can minimize damage to your business and your pockets.

Conclusion

Entrepreneurs can protect their assets by understanding the complexities of the divorce process, primarily when a business is involved. With the correct strategies, a business owner can come out of a divorce with their business intact. You must seek legal representation in a divorce involving a business in Missouri.

As an experienced family law firm, we can help protect your interests and guarantee a fair outcome. If you’re a business owner on the edge of divorce, use this guide to maneuver through the divorce process. Our experienced divorce lawyers at Hale Robinson & Robinson will help you through this process.

by Rico Robinson

Owner and Managing Partner, at Hale Robinson & Robinson.