Starting a business is exciting and a little scary. As confident as you may be about your service or product, you can never predict how successful your business will be. In this way, starting a business is similar to getting married. As committed as you may be to your spouse in the beginning, you never know how things will end up.
When a business owner gets married, he or she doubles the uncertainty. Not only is there a risk the business will falter but also the chance the marriage will end. Divorce can be disastrous if you do not take precautions to protect your business as early as possible.
Protection throughout your marriage
As difficult as the topic may be, it is critical to discuss with your intended the importance of signing a prenuptial agreement or, if you are already married, a postnuptial agreement to separate your Arizona business from marital property. You can include stipulations that limit the amount your spouse gets from the appreciation of your business during the marriage. In this way, if you and your spouse divorce, you will have less chance of losing your business through property division.
Without a marriage contract, you still may be able to protect your business by taking the following steps:
- Using your business organization documents to restrict the transfer of the business in case of divorce
- Establishing your business as a sole proprietorship
- Resisting the use of joint funds for business operations
- Keeping your family expenses separate from business expenses
- Keeping careful and detailed records of cash transactions in your business
- Paying yourself a fair income to avoid claims from your spouse that you withheld money from the family
- Limiting your spouse’s involvement in the business, or paying your spouse a fair wage for any work he or she does
Naturally, whether you ask for a prenup or postnup, or you decide to run your business without a marriage contract, you will want to be as respectful as possible toward your spouse so there is a mutual understanding of the importance of the steps you are taking to protect your business.
It may not be too late
If you are a business owner going through a divorce, you may be panicking because you did not put these options into practice. You are not alone. Many entrepreneurs learn the hard way how devastating a divorce can be to a business. However, you may still learn about options for saving your business if you seek advice from a skilled legal counselor.