The divorce rate is dropping across the United States. Time Magazine even reported that in 2016, the national divorce rate hit a 40-year low.
Despite the good news, divorces are still prevalent. Every case is unique, and the divorce process gets even more complicated when one of the spouses started a business during or directly before the marriage. It is not unheard of for entrepreneurs to lose their companies, but there are steps people can take while married to safeguard business interests in case a divorce ever happens.
Have the company as part of a prenup agreement
No matter how strong people think their marriages are going to be, it is always advisable to have a prenup. In the event the company existed before the marriage, then the prenup should make that clear. The business should be designated as a separate asset owned exclusively by a single person.
Separate family and business assets
Entrepreneurs should have separate accounts for personal and company expenses. Dipping into a joint bank account with a spouse can make a court think the spouse had a hand in developing the organization.
Be willing to sacrifice other assets
Many divorcing spouses go after their former partners’ businesses because they are sources of future income. However, if the business owner does not want to forfeit anything, then that person needs to make concessions. For example, the entrepreneur may have to give up 100 percent of the family home to retain the company.
Put company in a trust
This move may not be right for everyone, but it can be useful. When a company is put in a trust, it is no longer owned by the person who founded it. Therefore, it is no longer considered a marital asset. Another benefit of this financial action is it helps to protect the value of the business as it grows.