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How to Shield Your Business From a Potential Divorce

Posted on January 27, 2020 in Business and Divorce

How to Shield Your Business From a Potential DivorceThere can be a fine line between financial success and failure when running a business. A young business may not be able to survive an unexpected loss of revenue, and even an established business may suffer a setback. Most owners do not consider divorce when guarding their business against risks, but your business will get caught up in your divorce if the business is marital property. You may be forced to choose between giving up part of your business to your spouse or paying them off with other assets. By planning ahead, you may be able to protect your business from the division of property.

Prenuptial Agreement

If you started your business before you got married, you can use a prenuptial agreement to say that your business would not be marital property in the event of a divorce. The agreement could further specify:

  • Which parts of the business are marital and nonmarital
  • Whether your spouse would receive a portion of the amount that your business increased in value during your marriage
  • That you would have complete ownership of the business in case your spouse becomes a co-owner

You can create a postnuptial agreement instead of a prenuptial agreement if you have already married or you started the business after you married. In order for your agreement to be valid, you cannot coerce your spouse into signing it or withhold vital information.

Business Separation

The business itself – and not just its value – becomes marital property when you mix your marital finances with your business. For instance, investing your marital income into your business means that your spouse has a financial stake in the business. You can separate your business from your marriage by:

  • Forming a corporation, trust, or LLC to hold your business and its assets
  • Having separate bank accounts for your business funds and your personal money
  • Not hiring or using your spouse as a worker for your business
  • Paying yourself a competitive salary for your position in the company so your spouse cannot claim that you are hiding your income by investing it in your business

You need to maintain clear records of your business’s revenues and transactions to prove that you have kept it separate from your marriage.

Contact a Naperville, Illinois, Divorce Lawyer

Your spouse is likely to fight for a share of your business and its value during your divorce, even if you have a prenuptial or postnuptial agreement. A DuPage County divorce attorney at Calabrese Associates, P.C., is prepared to protect your business when negotiating your divorce agreement. To schedule a consultation, call 630-393-3111.


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