Business as your most valuable marital asset?

Building up a successful business is a difficult task. If you are married, it can put a lot of strain on your relationship, as the hours and money involved are often substantial. However, when things are going well, it can grant financial freedom and a sense of accomplishment. If your spouse took any part in the building up of your company, your business may be the most valuable marital asset you share and could be subject to division if you end up getting a divorce.

Equitable distribution law may require a significant change in the structure of a business following divorce. This uncomfortable truth is one that some business owners may not consider when their full focus is on getting their businesses up and running. 

Protecting the business before or after marriage

If you start a business before or after getting married, you may protect it in many ways. Before the wedding, you can consider having your fiancé sign a prenuptial agreement that states the business and its profits belong to you and you alone.

If you started the company after marriage, a postnuptial agreement with similar wording could offer similar protections. Other ways you may be able to keep your business from the worst of divorce include:

  • Paying yourself a reasonable salary and not reinvesting that money back into your business.
  • Adding divorce provisions to your business contracts.
  • Separating your home and work life.

By not co-mingling marital and business assets, and not allowing your spouse to take an active role in company operations, you will have the ability to claim your business as separate property if you ever end up going through the divorce process.

When your spouse fights your claim of separate property

If your business has grown significantly over the course of your marriage and your spouse believes that his or her efforts helped with that, he or she may fight your claims that the business is separate property in order to get a piece of the pie when the marriage is done. Pre- and postnuptial agreements, or your claim that your company is separate property, can be upheld, however, if you can provide proof that you kept your work and home life distinct from each other.

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