How to Divorce Proof your Business

by Scott Morgan on January 17, 2013

  • SumoMe

Going through a divorce is a stressful and exhausting experience. You feel like your world is collapsing, and you want to make sure your assets are protected. If you own a business, you feel like you could be at risk of losing the business, so you want to do everything in your power to keep the business. Division of a business is a common and complex issue that comes up in property division. Your spouse could attempt to take your business, even if you owned it before you were married; therefore, you need to find ways to divorce-proof your business.

When you get married, you expect to be married for the rest of your life.  However, things change and divorce is common in today’s society. If you get a divorce, the court will divide your property. Unless some legal exception applies, the business will be included and will be divided as well.

In a Perfect World Your Business Would be Protected by a Premarital Agreement

One way to protect your business is to sign a prenuptial agreement before getting married. Many people feel this is unnecessary; however, unexpected events can occur, so you need to protect your business. If the prenuptial agreement addresses your business your spouse will have a very difficult time challenging it.

Holding the Business in a Trust Can Also Provide Protection

You can also protect your business by obtaining a trust. Get a domestic or foreign asset protection trust, and your business will have an extra layer between it and the marital assets. As long as this was pre-marriage your spouse does not have to give consent and the trust gives you ownership of the business. The trust will own the business so it will not be considered as property during divorce proceedings. Trusts can be tricky, so as with any aspect of protecting your business you should get good legal advice when you set this up.

Common Issue: Spouse Claims the Business “Underpaid” You

In many cases, a spouse will say she did not get a fair portion of the business income while you were married, so she should be entitled to compensation for that. You can reduce the risk of this happening by paying yourself a reasonable salary and investing it into your own personal (ie, marital) investments.

Setting Up a Corporation for the Business

You can also protect your business by setting up a corporation. Again, ideally this occurs prior to the marriage.  In this case, the asset would be your ownership of the stock of the corporation.  The big advantage is that it shows a clear segregation from you the person and the business as a separate entity, own that was owned before you were married.

A business is a profitable asset, so it is likely to be a focus of your divorce case. There are ways to protect your business so take the proper steps to safeguard it so you can put this traumatic time in your life behind you.

About the Author

Scott Morgan is a board certified Austin divorce lawyer.  His firm, the Morgan Law Firm, has offices in Houston and Austin.

Scott Morgan
Morgan Law Firm is dedicated exclusively to representing clients in divorce and family law matters. Founded in 1994 by Scott Morgan, the Morgan Law Firm strives to diligently represent its client's interests and conclude their cases fairly and expeditiously.
Scott Morgan
Scott Morgan
Scott Morgan

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