For the majority of people, the most stressful financial aspects of a divorce are dividing funds and deciding who gets the house. But for business owners, there’s a company to maintain and protect.
In this post, Clayton Miller — family lawyer and head partner of KMJ Solicitors — highlights how to safeguard your business from a divorce.
The life of a business owner is complicated and stressful at the best of times, especially in the digital age where technology and the rise of small businesses has made every industry more advanced and competitive than ever. No matter how efficient and successful your company is, from time-to-time, your personal life can have an impact on your business — and there aren’t many situations that compare to the unrest of a divorce.
Over the course of a marriage, a couple accumulates a range of assets, but it’s also worth noting that your former spouse may feel that they are entitled to a percentage of the company or its profits. In this article, we’ll take a look at a few of the ways your divorce lawyer can help you to protect your business in the event of a divorce.
Prenuptial and postnuptial agreements
Although the suggestion of a prenuptial agreement may seem redundant if you are already married and soon to be divorced, it’s definitely something to keep in mind for the future. Creating a prenuptial agreement will allow you to define if your spouse will be entitled to a share of the business assets, such as property, money or shares.
If you’re already married and want to ensure that your business assets are protected, a postnuptial agreement will allow you to do so. While this may not be the most romantic suggestion, it will prevent a lot of hassle and expense if the worst should occur.
While a prenuptial and postnuptial agreements aren’t legally binding in the UK, it can heavily sway the court’s decision, as it demonstrates that both spouses came to an agreement over who is entitled to the business. Your divorce solicitor will prove to be useful at this stage and will be able to advise you on the best methods of protecting your assets, as well as draft an agreement for you and your spouse to sign.
Separate your business and household finances
If your former spouse decides that they have a claim on your company, even if it was established before the marriage, you could run into trouble if you have used shared funds or borrowed money from them for business purposes. It’s for this reason that it’s vital to separate your household and business finances, as this may allow your ex to argue that they have contributed towards the business.
If you have previously used household funds to cover the cost of various business expenses or as capital to start a new venture, now would be an excellent time to reimburse your ex. While doing this may not relinquish their entitlement to some of your business, it might satisfy them enough to make them back off.
Sacrifice other assets as divorce payment
When a marriage ends, the emotional unrest is often secondary to the stress that comes with the division of marital assets. Dividing money is easy if you agree on a fifty-fifty split, but deciding who gets the family home can be complicated — you can imagine how much upheaval bringing a business into the mix can cause.
If your former spouse’s interest in the business is purely financial, then the best course of action may be to sacrifice other assets as payment. Although this may seem out of the question or unfair at the time, especially if the two parties are hostile, making sure your business is intact and financially stable should be the top priority.
In this case, it’s vital to seek the advice of an experienced family lawyer, who will ensure that you aren’t taken advantage of and that you aren’t sacrificing your quality of life in order to maintain your company.