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Safeguarding Your Business During Divorce

Posted on in Business and Divorce

Safeguarding Your Business During DivorceBusiness interests are regarded the same as other properties during a divorce. If your business is classified as a marital property, it is part of the equitable division of property between spouses. While you both have a stake in it, the business may be more important to you if you are the primary owner and operator. It is your life’s work, as well as your main source of income. During the divorce, you want to:

  • Maintain control of your business; and
  • Keep the assets that your business needs to succeed.

In order to protect your business during a divorce, you may need to compromise on other marital properties.

Business as a Marital Property

Determining whether a business is a marital property depends on when ownership began and the financial investment of each party. If you started or purchased the business while married, it is a marital property. The business may be a non-marital property if your ownership predates the marriage. Non-marital assets are not included in the division of property, though your valuable individual assets may be considered during the division and when determining maintenance. A business that you started or purchased before your marriage may become marital property if:

  • Your spouse is a part-owner or purchases interest in the business; or
  • You use marital assets to finance expansion of your business.

Protecting Your Business

A divorce court is likely to award business ownership to one spouse, rather than attempt to divide it between them. The spouse who does not receive the business will be compensated with other marital properties of equal value. You may see this as a necessary sacrifice to keep your business, but there are methods to protect yourself:

  • Get a fair and accurate business valuation. Your spouse may overvalue your business in order to receive greater compensation. You need to counter with a true assessment of its current and future value.
  • Give yourself a raise. If you are reinvesting most of your profits into the business, that will drive up its value during the divorce. Your salary is your personal income. Increasing your salary will protect your business from being overvalued.
  • Remove your spouse from the business. This can be tricky if your spouse has ownership in the business. You would need to negotiate a buyout. If your spouse is merely an employee in the business, you may be able fire him or her. However, you may need to present cause for the termination.

Business Assets in a Divorce

Your business is one of the most valuable and important properties in your divorce. A DuPage County divorce attorney at Calabrese Associates, PC, can protect your business interests during your divorce. To schedule an appointment, call 630-393-3111. 

Source:

https://www.entrepreneur.com/article/220124

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