Individuals with advanced degrees or years of professional experience often decide to go into business for themselves. They might start a professional practice or a small business. That company may represent years of hard work and thousands of dollars in personal investment.
Successful professionals and business owners considering the possibility of divorce often worry about the companies they have developed. Under community property rules, assets acquired during marriage or improved with marital income are often subject to division when people divorce.
How can business owners protect the companies that they have worked hard to establish?
Perform a thorough financial review
Unless the business owner had the foresight to execute a prenuptial or postnuptial agreement designating the business as separate property, it may be subject to division during a divorce. Going over financial records can help establish how much marital income went to develop the business.
A proper valuation can help establish what the company is currently worth, which can have a major impact on the overall property division process. The more information the business owner has, the easier it may be for them to avoid risk to company equity or assets during the divorce.
Consider potential complications
The non-owner spouse may feel an attachment to the business. If a spouse has worked at the company or made direct investments, quantifying and recognizing those efforts can be beneficial. People may need to help their spouses transition to a new career if they currently work full-time for the business or professional practice.
Business owners may also need to consider the exposure created by formal discovery. Details about the business, its assets and their personal finances may require disclosure if they must litigate property division matters.
Seek an amicable resolution
Nothing is ever certain during divorce litigation. Judges can apply community property statutes as they deem appropriate given the circumstances. When people feel strongly about preserving specific assets, such as a business or professional practice, they have a better chance of achieving that exact goal through an uncontested divorce filing where they settle with their spouses.
Spouses can agree to terms that preserve the business outside of court. The business owner may need to make concessions regarding other marital assets or even financial support. However, provided that they compromise in other areas, they may be able to retain sole ownership and control over their business or professional practice.
Discussing one’s marital estate and personal property division goals with a skilled legal team can help those preparing for divorce plan an appropriate strategy. Those with more complex marital estates may benefit from the privacy and control that come from resolving matters outside of court whenever possible.