Protecting Your Business During Divorce

A divorce may have unintended consequences on the structure of a business, affect its assets, and jeopardize the interests of partners, employees, and customers of the business. A prudent business owner who has built up a business should consider ways to protect it. Common ways of safeguarding one’s business are contractual in nature and include the following:

Prenuptial Agreements. These agreements are the easiest way to protect one’s business in the event of a divorce. Before getting married, the agreement will delineate the part of the business that will be considered marital property and which will be separate property. Some agreements may also state that the entire business is separate property so that the spouse will not be entitled to any portion of it during a divorce. These agreements must be in writing and all assets must be disclosed to the spouse so that they are fully informed about the spouse’s financial interests. A prenuptial agreement is also a good way of retaining control over how the assets are split during a divorce as the agreement may be controlling and a court does not have to divide the assets of the business.

Postnuptial Agreement. If the couple has not entered into a prenuptial agreement before marriage, they may still be able to formulate the division of the business assets in the event of a divorce through a postnuptial agreement. Sometimes, prenuptial agreements are modified through postnuptial agreements. However, the courts do not view these agreements with the same seriousness as prenuptial agreements. Some jurisdictions do not even recognize them. 

Corporate Structure. Another way of protecting one’s business is through incorporation or creating a trust, which creates a separate entity that holds the ownership of the business assets. However, with corporate structure, it is crucial to maintain separate bank accounts and not commingle funds and accounts. Therefore, one should never use family accounts to pay for business expenses and vice versa.

Become the Sole Owner of Your Business

Becoming the sole owner of the business and limiting or keeping the spouse out of the business may be another way to treat it like separate property. If your spouse is involved in running the business, they will be entitled to a portion of the business. 

It is also important to make sure that as an owner, that the take home salary from the business is competitive so that in the case of divorce, the spouse does not have reason to claim entitlement to a larger percentage of the business because a portion of the rightful marital income was invested back into the business.

Baltimore Divorce Lawyers at Huesman, Jones & Miles, LLC Help Clients Create Prenuptial and Postnuptial Agreements

If you are business owner and have concerns about filing for divorce, contact the Baltimore divorce lawyers at Huesman, Jones & Miles, LLC.  For a free consultation, contact us online or call us at 443-589-0150 today.  Located in Hunt Valley and Towson, Maryland, we serve clients throughout Baltimore, Baltimore County, Bel Air, Bentley Springs, Columbia, Freeland, Hereford, Hampton, Westminster, Essex, Monkton, Sparks Glencoe, Parkton, Phoenix, Pikesville, White Hall, Carroll County, Harford County, and Howard County.

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A Message to Our Clients About Coronavirus COVID-19

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