Sharing a business with your spouse may seem like a no-brainer since married couples often share the same goals. However, the potential for conflict is greater if personal disagreements start affecting decisions as business partners. And divorce can spell even greater trouble for your business when the marriage goes awry.
Marital assets are divided fairly but not necessarily equally during a divorce in an equitable division state like Maryland. A business is considered marital property if it:
- Was started or acquired during the marriage
- Significantly grew during the marriage with the help of marital funds
Since business losses influence this division, your ex-spouse could end up owning half of the business you started if you don’t take precautions. You can employ different strategies to protect your business and secure your finances post-divorce.
Strategies for mitigating loss
Knowing how a spouse can acquire co-ownership is essential to understanding how divorce affects a business. Is there a state law or legal document that provides or prevents them from having co-owner rights? Build your strategy from there.
Some preventative measures you can take include:
- Getting a prenuptial or postnuptial agreement: Signing a prenup can protect your business by defining factors that may affect it, such as separate properties and pre-existing debts. But if you couldn’t get one, a postnup can still outline ownership, a plan to prevent business operation disruptions and protect co-owners outside the marriage.
- Appraising your business: Obtaining an accurate valuation through a professional appraisal is important to illustrate your business’s worth during divorce proceedings.
- Setting up a buy-sell agreement: If you have business partners outside of the marriage, a buy-sell agreement can also protect their interest by outlining what happens to your share during a divorce.
- Giving yourself a competitive salary: Paying yourself a fair wage that reflects the value of your work can help ensure that you can meet your personal financial needs even if your ex starts seeking a higher percentage of the business. It also demonstrates to partners and investors how serious you are about the business.
- Keeping your marriage and business separate: If you initially started the business, limiting your ex-spouse’s involvement through direct and indirect contributions can prevent them from accumulating shares. Avoid commingling assets.
Navigating asset division can be challenging, especially in high-conflict divorces. Protecting your business with objectivity and fairness are also valuable tactics that can ensure a smoother process of disentangling properties. Consulting a divorce lawyer is advisable if your divorce settlement can potentially disrupt business operations and significantly weaken your finances.