Nobody gets married expecting to get divorced a few years later, but it happens. If you run a business, you need to protect your enterprise from the possibility of a divorce long before you say, “I do.”
What are the best ways to protect your business from your divorce? Here are some tips:
1. Ask for a prenup.
It may not be the most romantic thing in the world, but a prenuptial agreement can save you — and your spouse — a lot of trouble if the worst comes to pass. When you negotiate a prenup while everything is good between you and your intended, it’s much easier for everyone to be fair-minded. Outline what will and will not be considered marital property and include specific language that addresses your business.
2. Keep your relationship separate from the business.
The less your spouse is involved in your business, the less claim they will have on it in the event of a divorce. It’s generally wisest if your intended spouse does not get involved in the business — even as an employee.
3. Define the business model.
If you’ve always operated as a sole proprietor, now is a good time to consider changing your business model to a limited liability corporation or something similar. This helps create a business entity that’s capable of holding its own assets. That could be important if you divorce. As a sole proprietor, your assets and the business assets are the same — which leaves your spouse with an open claim.
4. Establish an income for yourself.
If you pay yourself a salary, it’s much easier to establish a base income in the event of a divorce. You leave less room for your spouse to claim that you’re using the business as a personal fund and hiding income when it comes time to address things like spousal or child support.
Ultimately, protecting your business from a divorce comes down to preparation. With luck, you’ll never have to worry about the situation, but it always pays to be prepared.