A family business can be a significant asset. Pennsylvania couples who own one should take certain steps to protect their investment in case they get divorced.
A prenuptial agreement is a legal document that can detail what will happen to the business if its owners divorce. In lieu of a prenuptial agreement, a buy-sell agreement can be used to address what would happen with the business during a divorce. It is a contract between the co-owners of the business that can be used to compel a former spouse to sell his or her interest of the business in a settlement back to the owners at a price that would be determined by a specified valuation method.
A trust can be used as a long-term protection mechanism to protect business assets for the next generation in the event a member goes through a divorce that would typically put the family business assets at risk. This estate planning tool is often used in high-net-worth situations.
One of the simplest ways to protect a business during a divorce is for both parties to maintain ownership. However, this may not be a viable option for couples that have particularly contentious divorces. For couples who choose this option, they should have a shareholder agreement created to give each spouse the right to buy out the other at an agreed-upon price.
A family law attorney can assist a client who is a co-owner of a family business and is going through a high asset divorce. In many cases, a resolution of this issue can be handled privately through negotiations.