Marriage to the right person can certainly fill your life with countless blessings. However, if you are a business owner, you may be unaware of the risk you take if you do not protect your business from the damage a divorce can do. Even in a state like New York, where divorce laws require a division of assets that is equitable, your business may be on the table when it is time for property division.
Of course, no one likes to think that his or her marriage may not last, but the fact is that almost half of all marriages end in divorce. Failing to prepare for such a common contingency may be a mistake you will regret later. Even if you owned your business prior to getting married, without taking simple precautions, your company and its profits may become fair game in a divorce.
Taking steps to avoid disaster
It may not be easy or fair to keep your business all for yourself during your marriage. However, you certainly do not want to find yourself going through the valuation process to sell what you have worked so hard to establish and divide the proceeds with your ex. The fair middle ground is to make your business a sole proprietorship with clear restrictions on the transfer of the company in your business documents. The following steps may also protect you from losing your business if you should divorce:
- Do not mix your business accounts with personal funds or vice versa.
- Keep a record of where money comes from that you use to start or run your business.
- Carefully document every cash transaction.
- Pay yourself a fair market wage.
- Pay your spouse a fair wage if he or she does any work within the company.
You may also consider using a prenuptial agreement to decide on the treatment of the business in case of divorce. This is a delicate matter to discuss with your future spouse, but it may be the key to maintaining your business for the long run. Your contract can establish that the business is separate from marital property or agree to limit your spouse’s share of the business’ assets. This can help you avoid the hassle of working it out when the two of you may be less inclined to negotiate.
If you have a business and are planning to get married, you would be wise to discuss your situation with an attorney who can advise you of your options and guide you in creating a plan that is fair to your spouse and still protects your business.