How to Protect Your Business in the Event of a Divorce
As a business owner, it’s almost certain that you will face hardships, whether this is due to an economic recession, a change in consumer behaviour, or an internal issue, so it’s important to build up resilience and ensure that you have the resources to take control and protect your business throughout the process. As a business owner, it’s important to premeditate turbulence and plan ahead. Many business owners will study their market and prepare themselves for any dips and losses, but often overlook the possibility of family disputes, and how this can have an impact on the business. One of the most challenging processes a business owner can go through, is going through a divorce.
No matter how hard you try to separate business from family, in the event of a divorce everything will become entangled. If you ever decide to start a business with your partner, you need to first cover all avenues and possible outcomes, such as divorce. Have arrangements set in place, and legally binding contract in case the event of a divorce happens, as this will prevent your business from being torn apart during the divorce.
Be sure to plan ahead:
In the event of a divorce, you need to consider all of the important business factors, such as the amount of income your partner is receiving for the business, how much they will potentially lose, their involvement within the company and any future plans they may have had for the company. If you cannot work alongside your ex partner, then it’s necessary to come up with a fair settlement and plan in order to compensate them for any loss they may experience. When you are factoring a business into a divorce, you needs to carefully calculate all decisions to be in the best interest of both parties involved.
There are several different types of divorce, whether they are amicable, or whether they are hostile, it’s always important to have a fair split of assets when agreeing on a settlement, so when factoring in a business, it’s important to explore every option available before you make a decision. The most important factors to consider are:
- (Premeditating a divorce) Getting a prenuptial agreement, if this is something that you have already agreed upon, then your divorce will be a more salient process in terms of dividing assets.
- Treat your business and private assets as separate entities. A business needs to be assessed in a way that will first and foremost benefit the business, rather than the parties involved, as there are employees, customers and clients to factor in.
- Compromise and share ownership – whether one of you becomes a silent partner, and gets paid a set salary and dividends, or whether you work alongside each other and remain professional, there are lots of different avenues to explore that could protect your business from any unnecessary scrutiny and legalities.
Impartially value your business:
When your business is going through the legal divorce process, it’s important to have an impartial party to value your business. Anybody who has a personal connection to yourself or your business will be seen as an impartial source, which could cause further complications during your settlement agreement. An impartial source is somebody who is believed to have undervalued your business, in order for the party who is seeking full ownership to benefit from this. Undervaluing a business means paying less money in the settlement, and getting a better deal than the other party.
(Alice Porter works for a Dispute Resolution Lawyers and aims to share her knowledge and information to business owners on how to act in certain legal situations.)