After you and your spouse file for divorce, all of your marital assets will be considered for division. If you own a business, it could also be part of the assets. If you believe that you and your spouse are headed for divorce, here are some ways you can protect your business starting today.
Keep Your Assets Separate
If your business and personal assets are commingled, now is the time to separate them. By continuing to allow your finances to mix, you are making your business vulnerable to your spouse. Your spouse could argue that he or she is entitled to a share in your business's assets because the personal and business finances are integrated.
Even if you and your spouse do not divorce, keeping your business and personal finances separated is a good idea. In the event that your business has financial troubles, your personal assets will not be impacted.
Encourage Your Spouse to Leave the Business
If your spouse has been working in the business, now is the time to encourage him or her to explore other career options. Although it might seem harsh, the longer your spouse is involved in the business, the stronger his or her argument for part of the business assets becomes.
Your spouse could claim that by working in the business, he or she has helped to build it. A divorce court judge will take into account your spouse's participation and likely reward him or her for it. Not only could your business's current assets be divided with your spouse, but if a judge agrees that he or she helped to build the business, your future profits could also be split.
Establish a Trust
A trust could provide your business with the protection that you need. If you establish a trust, you can name the trust as the owner of the business.
There are several reasons to set up a trust, but the most important is that if you and your spouse do divorce, you could argue that your business should not be considered as a marital asset. The court might be willing to believe that since the business is owned by a trust, it is not technically yours and not part of your assets.
Talk to your divorce attorney about other ways you can protect your business. He or she can not only review your legal options for the business, but also your other assets.