A friend of mine relayed a story to me recently. He was riding in an Uber, and the driver was lamenting about how he’d been forced to take this job to make ends meet while his boss fought to keep his company through a divorce.According to the driver, he’d worked for this company for a number of years, but when the owner of the company got served papers for the divorce, it quickly became apparent that dissolving the marriage may also include dissolving the business, and he’d be out of a job.
The owner of this company is learning the hard way that businesses count as marital property if one does not take precautions to prevent this type of scenario, usually done with a prenuptial or postnuptial agreement. The truth is, the cab driver may have to accept that his job really is going away because of his boss’s divorce.
How can my divorce affect my business?
Unless you have a prenuptial agreement protecting your business from property division in a divorce, you have some serious choices to make very quickly. Under the law, a business can qualify as marital property in much the same way that a home or a savings account can.
If you began your business after you got married, your spouse may have a legitimate claim to a portion of value of the business. However, even if this is the case, your whole battleship is not yet sunk. You still may have some options, but must act quickly to keep your business safe.
What are your options?
Each person’s choices vary greatly, depending on the specifics of one’s circumstances. However, you may consider some of the following possibilities, along with proper legal guidance. If you face a divorce and also have a business to try and keep together, you almost certainly want careful, professional legal counsel from an experienced attorney. An attorney can help you review the details of your circumstances and create a personalized strategy to keep your priorities protected throughout the divorce.
Consider a postnuptial agreement
A postnuptial agreement may still be on the table if you have not burned too many bridges within your marriage. In such an agreement, your spouse would agree to forego his or her portion of the business during property division in a divorce.
Keep your personal and business matters separate
If some sort of agreement is not possible ahead of the divorce, you want to keep your business and personal matters as separate as possible, especially where it concerns your spouse. You must end any involvement your spouse has in the business.
Do they work for the business? Fire them. Are they involved in the business affairs in some way? Restrict their access. Are your family finances commingled with business finances? Sort this out immediately. You want to demonstrate that the business is distinct and separate from your marriage.
Understand the value of the business
You may also need to have the business valued professionally. This way, you know exactly what you have to work with. Your spouse cannot claim that he or she deserves more than the business is worth once it is professionally valued.
You may have to offer your spouse other assets to offset his or her claim in the business. While this is not comfortable, it may be the only way you have to keep the business intact so you have something to rebuild your life with after the divorce finalizes.