How to Divorce Proof Your Business and Why You Should Do It

US business owners make a major contribution to the US economy. This is achieved through a variety of ways, including providing jobs and paying taxes. Inevitably, many business owners get married, often after they’ve built up their business. And, while no-one goes into marriage planning to divorce, data unfortunately suggests that around 50% of first marriages still end that way.

If you want to protect your business that you’ve worked hard to make a success of and provide your family and the local economy with a better quality of life, then there are a number of legitimate and sensible options you can take.

Get the Set Up Right

When you first began your business – one of the almost 6 million employer companies in the US – you may not have had marriage, or divorce, in mind. But, even if you have no immediate marriage plans, the initial set-up of your business can make a big difference to any potential claims a future ex-partner might have on it. Attorney Katherine Grier, advocates a number of ways to protect your business from an ex-spouse, including:

  • Registering your business as a Limited Liability Company, or LLC, which could shield it as being considered a personal asset.
  • Making your business a c- or s- corporation, which works in a similar way to the LLC, as it categorizes your business as a separate legal entity, from you as an individual.
  • Another helpful legal structure, is to create a trust and have that as the registered owner of your business, once again separating your business from your personal finance structure.
  • Always keep the financial structure of the business completely separate from your personal accounts and finances.
  • Entering into a pre- or post-nuptial agreement that states your married partner has no involvement in your business and no valid claim on its value as an asset.

Even if you don’t do this from the outset, provided you make the right registration decision for your business well before your marriage, you can still protect it from future marital unhappiness.

You’re Not Just Protecting Your Own Finances

By creating a legal situation in which your company is considered safer from divorce proceedings, you’re not only protecting your own income and hard work, you’re making the right decision for the local economy.

A divorce judge has the ability to order the sale of your business and force you to comply. This could put the jobs of all your employees at risk and also the tax income your business pays to the state, not to mention the spending that’s enabled by the profits and wages your business generates.

There’s no excuse for avoiding your financial responsibilities during a divorce. However, it’s also important to protect things you’ve worked hard to create, both before and during your marriage.

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