Unfortunately due to increased pressure on families as a result of the recent pandemic, we have seen more and more families breaking down, and couples seeking separation and divorce.
Google has seen a spike in divorce-related searches over the last few months.
Divorce and separation are some of the most challenging experiences you may ever live through, and that is made it all the more painful when a business is involved. Not only are you grieving and trying to process your relationship breakdown, but you also must think about your financial future, your career, and what is a fair and just way to consider allocating your assets in the divorce.
Throughout this article, we explore multiple ways you can protect your business, in the context of a divorce or separation.
A prenuptial agreement can be a very challenging thing to discuss at the beginning of a relationship. You are essentially asking your partner, to make a plan about how you would resolve certain financial issues in the event of a relationship breakdown.
For many people, this conversation may be seen as a lack of commitment, and almost an expectation that you are not expecting the relationship to last. However, regardless of these difficulties, most divorce lawyers would suggest that a good prenup, is a very smart investment, even though it may be a challenging conversation and process to work through with your partner.
A prenup basically outlines what each person’s claim would be on certain investments or assets in the event of a relationship breakdown. Knowing how tricky negotiations can be following a breakdown, a prenup can solve and reduce a lot of that potential tension.
However, a prenup is only a solution if you have the conversation before your relationship difficulties emerge. If your relationship has already broken down or is in the process of breaking down, then it is too late to consider a prenup.
GSRM has been practicing family law for over 30 years and is very experienced in these matters.
Be Willing to Sacrifice Other Assets
If business protection is one of your highest priorities (in a financial sense) as you process a failed marriage, then you may need to consider sacrificing, or granting favorable terms on the settlement of other assets that you are trying to distribute between yourself and your ex.
It could be your house, a holiday house, or any other asset that is considered valuable by both of you. If you take a generous approach with some of these other assets it could assist in you keeping greater control and ownership of the business if that is your top priority.
Even if you feel like you are giving up more than your fair share, and the other person is getting a better overall deal, there may be situations where that is the best thing to do in order to maintain control and ownership of your business. With a business, there is always a potential upside for you to grow it further, which could make it a very profitable and valuable asset in the future, even more than it is today. So consider that potential upside in your negotiations as well.
Get A Business Valuation
One of the first things you should do when trying to protect your business during a divorce is to get a business valuation. Having a high turnover, and paying you a good wage, does not necessarily mean that the business has a high value.
Depending on potential liabilities, and claims against the company by other shareholders, your actual ownership of the business may not be of significant value. But you will not be able to determine this until you get a proper, official evaluation of the business done.
If you do get in a valuation done, ensure that your ex and their lawyer consent to the person or company chosen to do the valuation so they do not dispute it later on.
Get The Right Business Structure
The right business structure can literally save you millions of dollars if you have one put in place. Similar to a prenup, the business structure would need to be in place before you start to experience relational difficulties, otherwise, the change in structure would be considered a strategic move to try and get an unfair advantage in the divorce proceedings.
Like a prenup, it is a smart business decision, not only to protect your personally from other liabilities, but to protect you and your business in the potential event of a divorce.
A good tax advisor and business legal consultant can give you appropriate advice on this topic.
There is a variety of both proactive and reactive things you can do to protect your business when your marriage fails. If you have the capacity to establish a prenup, and a good business structure at the start of your relationship this can save significant heartbreak and hassle at the end of your relationship. However, If you find yourself in a divorce situation and you do not have these things in place then it may be wise to get a business valuation and consider how flexible you can beat regarding your other assets if protecting the business is your number one priority.
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