Few people get hitched thinking of divorce, and it’s only natural for newlyweds to expect just the best from their future life together – but it still doesn’t mean that you should dive into the marital waters without safeguarding your business from the worst case scenario. A divorce is taxing enough on the heart and nerves, and you should by no means allow it to compromise your finances and career along with your emotional wellbeing. Before a divorce lawyer comes knocking on your doors, you should take preventive steps to make sure your business doesn’t wind up on the list of items lost through a less than favorable settlement agreement.
1. Prenup, Postnup and Everything In Between
Prenups and postnups are a business owners’ best friend when the marriage hits the rocks, as they define the company ownership structure in case of divorce. While prenups are a solid legal safeguard for enterprises founded prior to marriage, postnups are a better option for businesses launched post-wedding, i.e. for companies both partners have a stake in. If possible, make sure the company is registered to your name, or at least have your name and personal details listed in all relevant corporate documents. That way, your ex-to-be won’t be able to skip the business bit from marital property settlement talks, and your career will stay on the legally safe side of the negotiating table.
2. Sign a Buy-Sell and All Will Be Well
A buy-sell agreement is another convenient safeguard for your business in the face of a court-approved split. Buy-sell agreements define the steps to be taken in case the business partners’ status slides from ‘Happily married’ to ‘Happily divorced’. The agreement can entitle a former spouse to a say as regards the price, terms, and conditions in case the other party decides to sell the company, or it can limit the partner’s stake in the post-split business sale revenues to a predetermined percentage-based interest. A buy-sell agreement can also annul a partner’s right to a post-divorce share in the company, and it can also limit a partner’s right to company sale or impose the right-to-first-refusal for business sales after the split.
3. Let Love Be Lost, Trust In a Trust
Putting your freshly-launched business in a trust is another expedient preventive measure that will help you save your career and long-term financial safety in case the ‘Happily ever after’ goes to bits eventually. Not only will the trust keep your corporate assets safe from unfavorable split settlements in divorce negotiations, but it will also double as a prenup and keep the company’s growth value in check. It would be a very smart business move to register yourself as the trustee in charge of the important company updates and management: that way, you won’t be at risk of potential fraud and dips into the corporate piggy bank by your no-longer-significant other.
4. Sure As Surefire Insurance Policy
A life insurance policy which builds cash value over the years is a legal step few people take for their own financial safety’s sake, but it can still be an invaluable trump card up your business suit sleeve in case of divorce. In case your marital happiness grinds to a halt, you can liquidate the life insurance policy and use the cash to buy out your ex’s share in the joint business venture without having to dip into your savings account or sacrifice your comfort through the sale of your family home or valuables. You can add the insurance point to the list of critical questions to tackle before launching a joint corporate project with your spouse, and you can also encourage them to take out their own insurance policy to play it safe for both sides in the partnership.
5. Early Birds Catch the Profit Worm
Many partners in both marriage and business ventures who want to end up on the winning side of the negotiating table when filing papers for divorce in California have multiple backup plans in place when it comes to post-divorce finances, and you should take their cue. Life after divorce comes with a steep price tag, but that doesn’t mean that you should allow yourself to reach for the corporate funds every time the mailman drops by to deliver the bills. Set up a separate checking or savings account and place non-matrimonial valuables in a bank safe before things at home start to go awry. That way, you’ll be securing a readily accessible emergency fund for a rainy post-divorce day which you’ll be able to dip into in case the chance arises for you to buy out your partner’s share in the company, and it will also help keep the company’s financial standing shipshape.
Divorce is always ugly business, but your business profile shouldn’t be called out in the divorce spiel. Play your business moves like a legally-savvy entrepreneur: set your corporate records on the right foot as soon as you go into business and reinforce the company’s line of legal defense from first to last before the time comes for you and your partner to go separate ways in both life and business. Good luck!