People preparing for divorce often need to take steps to protect their most valuable assets. If a married individual considering divorce currently runs a business or professional practice, protecting their company may be one of their top priorities.
There are a variety of different strategies that spouses with vulnerable resources can utilize to protect those assets during divorce. All of the three strategies below can reduce the threat that divorce poses to a business or professional practice owned by a married person.
Signing a prenuptial agreement
Those intending to marry while already running businesses can protect their organizations by negotiating prenuptial agreements. Each spouse can request certain protections and concessions. The same is true when negotiating a postnuptial agreement. Spouses who have already married can still negotiate a contract explaining what happens in the event of a divorce. One spouse can name the business as separate property in the marital agreement or impose other key restrictions on property distribution.
Holding the business in a trust
Direct ownership of a business has several legal drawbacks, including the vulnerability of the organization during divorce or lawsuits brought against the owner. Creating a business trust to hold the company can be a way for business owners to protect their interest in the company should a divorce occur or should any other major challenges endanger their interest in the organization.
Settling out of court
If business owners do not have pre-existing legal plans in place to protect the company in the event of a divorce, it can be very difficult to predict how a judge might address a complex and highly valuable asset. Spouses preparing for divorce can negotiate settlements with one another instead of litigating. An appropriate divorce settlement gives spouses control over property division and other key terms. A business owner can retain sole ownership and management of the company in return for granting certain requests made by the other spouse.
There are a variety of other strategies that can also work depending on the details regarding the divorce, the marriage and the business itself. Reviewing financial priorities and concerns with a skilled legal team early in the divorce process can help people develop strategies that protect their most valuable assets.