Divorce has the potential to wreak havoc on both your personal and professional life, especially if you own a business. For the divorcing business owner, it is crucial to begin building your strategy as soon as possible if you hope to keep the business intact throughout the divorce and beyond.
It’s not 50/50
Pennsylvania business owners are in luck, in part, because we use “equitable division” guidelines rather than “community property” rules to govern marital property division. In broad strokes, this means that divorcing spouses do not automatically split the value of all marital property down the middle, but have the flexibility to agree on a division of assets that treats each side fairly, if not exactly the same.
If you hope to protect your business in your divorce, you need to take action immediately. Otherwise, you could see your years of hard work and future income evaporate.
A postnuptial agreement can help
A pre- or postnuptial agreement is the best way to protect your business from division in the event of divorce. However, it is probably safe to assume that you do not have a prenuptial agreement of this kind if you are reading this.
If your relationship with your spouse is still relatively amicable, you may be able to convince them to sign a postnuptial agreement. Of course, this is a risky proposition if your spouse is not amenable.
Before attempting to secure a postnuptial agreement protecting your business, be sure to consult with an experienced attorney.
In the absence of a well-crafted post-nuptial agreement, you can still save your business, but it takes great focus, determination, and sacrifice.
Separate and value your business
If you anticipate your spouse wanting his or her fair share of the value of your business (which they could reasonably expect), you must take decisive action.
First, you must make sure that your business and personal finances are accurate, separate and fair. This means maintaining your business and personal financial records impeccably, making sure there is no cross-pollination between personal money and business money, and avoiding great deviations from your typical spending patterns.
- Pay yourself fairly according to what other comparable business owners take home. Receiving a low salary from the business may look to your spouse as though you kept money out of the home to avoid dividing it fairly.
- Cut out your spouse’s involvement in the business altogether, if at all possible. If your spouse works for the business, this means properly firing them.
- Do not use your business’s resources for personal expenses, and avoid using personal money or credit to invest in the business. The more separate the two are, the better.
Once you sufficiently separate your business and personal lives, you might consider a professional valuation of the business. Once you know the exact worth of the business, your spouse cannot claim they deserve more than their share of its value.
Build a strong team and negotiate for the future
Without strong legal counsel from an attorney who understands the nuances of saving business and achieving fair divorce, you face a difficult and unlikely path to victory. Obtaining strong legal counsel from a professional attorney is essential if you hope to keep your business intact.
With proper guidance, you can protect your rights while negotiating with confidence and making the necessary sacrifices to save your business and begin building a fresh start in a new season.