Residents of Pennsylvania may be interested in learning how to avoid pitfalls associated with safeguarding a business from complications in a divorce process. Building a business is difficult enough, but unexpectedly receiving the news that a spouse is filing for divorce can drastically affect entrepreneurial efforts. Taking the necessary steps to ensure a business is protected is crucial.
A common scenario among business owners is getting married with a small business and not filing a prenuptial agreement. Later, the business grows into a multimillion-dollar one — and the owner’s spouse now has stake in it. In some cases, an ex-spouse could end up with possession of the entire business.
There are some strategies that could help protect any business assets should a divorce ever take place in the future, such as filing a postnuptial agreement that defines the company as a separate asset. Other strategies are protecting the business’s valuation by placing it into a trust as well as purchasing a whole-life insurance policy that can provide the necessary funds to buy the ex-spouse’s shares, if necessary.
If the above preventative measures have not been taken and a divorce may be probable in the future, there is still hope to safeguarding the business. It is wise to make sure all personal finances are kept separate from the business and to maintain proper records. Firing a spouse is also an option if they have been inactive in the company. A business owner may consider retaining all of the company by offering other assets in its place, such as the family home and retirement accounts. Property division is a complicated process, especially in high-asset divorces. A divorce lawyer may help their client identify additional ways to prevent a business from being affected in a divorce proceeding.
Source: Entrepreneur , “How to Divorce-Proof Your Company“, Carol Tice, August 08, 2011