Protecting Your Business from Divorce

Divorce can be complicated – but when a business is involved, it is practically guaranteed. You may be working with your ex for the company’s foreseeable future, or you could be fighting through a preliminary hearing and costly litigation to keep it from being sold. For this reason, it’s important to consider how your marriage and a divorce could affect business. An experienced San Diego divorce lawyer can help you protect your business while going through a divorce.

In California, companies can be considered community property. They may be totaled with all other assets and divided evenly between spouses. When a business is involved, this includes anticipating future growth and the time and energy both parties contributed to its success. Courts even account for the toll running a business takes on a family. If your separation goes before a judge, he or she could assign total control of the company to your partner. However, you can preserve your enterprise and protect your financial future by taking some initiative.

Be Proactive 

Working with a San Diego prenuptial and postnuptial agreement lawyer can help you define a business as a separate asset outside of your marriage. There are some issues that may dissolve these agreements, however. You can further protect your company by:

  • Creating a trust. If you do not personally own the business, it cannot be included as a marital asset.
  • Buying insurance. Insurance provides cash value over time. If you do have to cover a spouse’s share of the business after a divorce, you can liquidate insurance funds to offset these costs.
  • Drafting a buy-sell agreement. These contracts define what happens to a business if an owner dies, goes bankrupt, sells the enterprise, or divorces.

Getting these documents squared away is a good start, but there’s more you can do within your business to keep it intact through a divorce.

Separate Your Business and Family Finances

Preemptive actions can protect your enterprise from issues that may surface once divorce proceedings start. Judges account for the burden a business takes on your family, but you can minimize this by keeping thorough records and clearly separating business and family expenses. Do this by:

  • Paying business expenses with business finances; do not dip into personal family funds to pay for company trips or equipment.
  • Paying yourself well. The more your family is involved with the business, the more likely your spouse can claim he or she is entitled to company assets. Giving yourself a smaller salary negatively affects your family’s quality of life. This could influence the court’s decision.

In addition to these measures, limit and ultimately eliminate your spouse’s involvement with the business. The more prominent the role your partner plays, the greater his or her claim to the company. In this case, it would be easy to argue that he or she helped build the enterprise and should profit from its growth.

Know Your Legal Options

Regardless of how carefully you plan, a business could affect court proceedings. When this is inescapable, there are still a few ways to divide, manage, and protect assets that work out in your company’s best interests:

  • Balance your assets. You may retain complete business ownerships by compromising other assets. For example, negotiating savings accounts or homes can lead to a fair arrangement.
  • Work with an experienced legal team – and be honest. A neutral valuation can help both spouses reach an agreement in the friendliest manner possible. This independent evaluation, accompanied by another impartial review, can outline your asset’s value and how these accounts can be divided. Be honest through this process. Report everything; discrepancies could undermine your credibility and affect your business’ future.

Hire a family attorney in San Diego, CA who knows the ins and outs of divorce law to ensure the best possible outcome. You may also seek financial help to assist you with evaluating your assets. Contact Boyd Law for more information. We have helped numerous clients and entrepreneurs reach fair compromises that ensure their businesses can keep profiting.