Divorce is difficult, but it can be particularly hard for business owners. Apart from the usual divorce pressures, you also have to face the possibility of losing or sharing the business you sacrificed so much for with your soon-to-be ex.
If your spouse directly or indirectly contributed to your business, then the business may be considered marital property, even if you started the business before the marriage. Since Virginia is an equitable distribution state, you may still have to share the value of your business. Keep reading to know what to expect if you file for divorce.
Divorce can affect your business
Businesses are considered property, like houses, cars and retirement accounts. Therefore, the court will aim at giving an equitable settlement when dividing assets. However, equitable doesn’t necessarily mean equal. The principle of equitable distribution is simply that the settlement is fair.
The court will consider the duration of the marriage during the settlement. If your marriage lasted for several years, your spouse may receive a bigger piece of the business than if the marriage lasted only a few years. While this isn’t the scenario you have in mind, it could happen if you don’t take the right steps in advance to protect your business.
How can you protect your business before filing for divorce?
You can take action in advance to increase your odds of keeping your business after the divorce. To help divorce-proof your business, you may choose to:
- Create a prenuptial agreement: A prenup may help protect your business by designating your business as separate property. This is something that has to be done before the marriage commences.
- Sign a postnuptial agreement: A postnup is similar to a prenup but is created after the wedding. However, the judge may carefully scrutinize the postnup since your spouse will have signed their rights away.
- Place your business in a trust: Putting your business in a trust will mean that you don’t personally own the business; hence it won’t be considered a marital asset.
If you’re contemplating divorce, it’s important to consider how it can affect your business. Review your options with financial and legal professionals to learn about your option and take steps that can help to protect your assets.