How to Protect Your Business in a Divorce

Man in his business at risk during divorce

Starting a business is an exciting, yet scary time in most people’s lives. For those who have put countless hours and capital into their business, to finally see it flourish, only to have it possibly taken away at the threat of divorce – well, that’s just a nightmare. As a business owner, it’s important to understand some of your rights in case of divorce:

1. Understanding the difference between separate property versus martial.

Separate property is often classified as legacy, gift or decent. An agreement of property excluded with an agreement among all parties.  Property acquired before the marriage, and property after a legal separation. Separate property becomes tricky when mixed with material, for instance, if you own your own condo, but decided to list your spouse as a co-owner. That property then becomes material.

2. Don’t involve your spouse in your business.

As hard as it may be not to bounce great ideas off your spouse, you are risking your business. Your spouse may then be able to claim earnings for helping you. You should also avoid hiring your spouse.  The less of a role your spouse plays in your business— the better.

3. Consider a prenuptial or postnuptial agreement

Did you know that a well-drafted prenup can override both Community Property and Equitable Distribution State laws?  As an obvious measure to help protect your business, putting a prenuptial agreement in place before the marriage begins is the best tactic. For the agreement to be valid it must be in written form, full assets – including ownership in your business – should be disclosed.   Even if you don’t get a prenup finalized before you marry, you might consider a postnuptial agreement as an option after marriage.

4. Pay yourself first

Although it may be tempting to reinvest all of your profits back into your business as it grows, it’s important to pay yourself an appropriate and competitive salary during your marriage. If you don’t adequately compensate yourself, your spouse may argue that you did not give enough to the household by instead choosing to reinvest in your business. If this is the case, a judge will be more likely to entitle your spouse to their fair share of your business assets or even to a higher percentage of equity in your company.

About Vangorodska Law Firm, the New York Divorce FirmVangorodska Law Firm is a top-notch firm based out of New York City, providing expertise in divorce, property division, child custody and more. With over 30 years of experience, Yulia Vangorodska has developed a keen intellect in family law. To find out how Vangorodska can assist you today, please visit www.nydivorcefirm.com

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