With an unexpected divorce come many potential negative consequences. Emotionally, you may well experience some mental trauma and a period where your psyche is in turmoil. There’s a toll that’s placed on all your other relationships, and financially, things can get costly (to the point where you might even be forced to file for bankruptcy).
The financial impacts of a divorce might be even more far-reaching if you have your own business, so it’s important to take steps both ahead of and following a split to help safeguard your future. While it’s not a comfortable topic (to say the least), here’s what you should know.
Forming An LLC Might Be A Wise Decision
Though this option isn’t in the minds of most sole proprietors, there are advantages to forming an LLC or corporation for your business in the event of a divorce.
You’ll be creating a separate entity that will maintain ownership of your business assets, keeping them separate from your marriage.
It’s important to note, however, that you shouldn’t use marital assets to pay for your company’s expenses, because that might lead a court to believe that your company is then marital property.
Get Yourself A Prenuptial Agreement
It’s been said that discussing a prenup with your partner can sap some of the romance out of the initial stages of a marriage, but it’s also a worthwhile conversation to have if you’re interested in protecting your business and finances.
A well-organized prenuptial agreement can help lay out if any parts of your business will be marital property ahead of time, along with what is supposed to be considered separate. You should also be able to include provisions stating that your spouse would not be entitled to half of your business upon divorce.
Separate And Secure Your Business Workings
It’s still possible, even with certain protections in place, for your business to be considered marital property if your spouse is employed by your business or assists in running your business. It’s important, in the at case, to keep your spouse out of your business dealings to as great a degree as possible, and to put continuity measures in place so that you can maintain some business stability in the event of a divorce.
Avoid Going To Court If Possible
Though sometimes it’s unavoidable, and you’ll have no recourse but to speak to a business litigation attorney about partnership disputes or business dissolution, the fact remains that such a process can be lengthy and expensive. In many cases, it’s difficult to walk away the “winner” in such scenarios, and leaving your circumstances in the hands of a judge can result in less-than-ideal outcomes for all parties.