Maybe trouble had been brewing for a long time, or maybe the prospect of divorce hit suddenly like the proverbial ton of bricks. Either way, if you are a business owner, your livelihood could be in jeopardy.
There are basically three scenarios. The couple founded and grew the business together, one spouse started the business and then got married or a spouse began the business after the marriage on his or her own.
Entrepreneurs who did not protect the business entity in either a prenuptial or a postnuptial agreement may now be facing some hard decisions. Below are some strategies that might help you save your business from foundering in the wake of a divorce.
Pay yourself a decent salary
Channeling a major share of the proceeds back into the business can turn those profits into shared marital revenues that must be divided.
Don’t commingle funds.
Keeping marital and business funds completely separate — and being able to document same — can be the difference between surrendering ownership interest of your business or retaining it.
Fire your spouse.
If the divorce has already been filed, this may not be possible. However, if divorce is imminent, find a way to ease your wife or husband out of the management operations of the business.
If your soon-to-be ex-spouse has a long-standing and/or prominent role in the business, the more difficult it will be to argue that he or she had little interest in the company.
If you have a thriving business you want to retain, you may have to sacrifice other significant marital assets in lieu of a share of the business. Offer your share in the family home or a larger share of any pension funds or retirement benefits instead.
Make a series of payments.
If your spouse is a reasonable person who is willing to work with you, offer to pay him or her off in a staggered series of installment payments. That can also give you the wiggle room you need to take out a loan or take on a business partner.
Remember, too, that there’s always room for negotiation when working out a fair property settlement in your divorce.