How to Protect Your Business in a Divorce

You have worked so hard to build your business. It’s not only a source of income, but it is a source of pride. Whether its a year or 30 years in operation – your business is your livelihood.


You, like many Americans, are finding yourself in the tenuous position of a looming divorce. How does this affect your business?


What Happens To Your Business?

Like any marital asset, generally, your spouse is entitled to half of your business when you divorce.


Ideally you would have a prenuptial agreement prepared before getting married. If you did not have one prepared, don’t despair.  There are several ways you can protect your business.


How Can I Protect My Business?


It may feel like a hopeless situation to be facing divorce and the possible loss of your business, but there are a few things you can do now that you are married without a prenuptial agreement to protect your business:


Postnuptial agreement: This is like a prenuptial agreement, but is called a postnuptial agreement because prepared after you get married.


• Settlement agreement: You are thinking – there is no way my spouse will give a fair agreement to me at this point in our marriage. Our relationship is just too rocky.

If you believe you may have missed the opportunity to have a postnuptial agreement prepared a settlement agreement is the next best thing if you are contemplating a divorce. A settlement agreement addresses how your business, your property, money, and debts will be divided, if at all.


• Offer Other Assets: During a divorce, you have the option to use other assets to give your spice their share of what you owe, instead of giving them half of the business.


• Operating Agreement: When you establish a business, in consultation with your attorney, you should write your operating agreement so there is a clause that states your spouse’s portion of the business will be divided among all other partners of the business if you divorce.

You might also include in the clause what amount or percentage of the business you are willing to pay your spouse to give up their share of the partnership. This operating agreement should be honored as part of the judgement of divorce.


• Litigation: During the litigation process, you have negotiating options. With the legal advice of your attorney, you will decide whether to argue at trial that you should buy your spouse’s share of the business, and they will give up their ownership interest.


• Sell the business: Selling the business and splitting the proceeds with your spouse might not be the most ideal solution if you want to hold onto your business. If you don’t care, then you might want to consider it.