• 11
  • June
    2010

If you own any sort of complex property, such as a business, a divorce can be utterly devastating. All that you have worked so hard to build may be divided by the court in the name of equity. However, you do have options. Today's post will briefly examine three different asset protection strategies that can help a person protect their business interests during the equitable division process.

Insert the necessary protective language into all business operating agreements

Whatever your business structure (partnership, LLC, etc.), it may be wise to consider including language in operating/shareholder agreements that limits the fallout in case a partner gets divorced. For example, you may insert language requiring all partners to obtain a prenuptial agreement in the event they get married, as well as a waiver from the soon-to-be spouse forfeiting any future claims seeking a business interest.

Another possibility may be to include a right of first refusal clause in operating/shareholder agreements. This would give the other partners the first chance to purchase or match the price for any business interests that are put up for sale. To illustrate, if a spouse divorces one of the partners, obtains a percentage of his or her business interests and attempts to sell it for a profit, your organization would always have the opportunity to maintain control of its operations.

Limit your spouse's involvement in the business

In all probability, the courts will view some portion of your business as marital property. However, the size of this portion will probably be much larger if your spouse is an active participant in the business (i.e., was employed by the business, contributed ideas or helped manage its operations). If you are truly concerned about the possible division of your business interests, you may consider limiting your spouse's involvement.

Be certain to earn a salary commensurate with your efforts

You may be jeopardizing your business interests by paying yourself a modest salary and reinvesting all profits back into the business. A spouse can easily argue to the court that much of the money you earned did not go to the household, and that they are therefore entitled to more money or an even larger share/percentage of the business. A salary commensurate with your efforts may help prevent this situation.

Consider contacting a skilled attorney to learn more about asset protection or equitable division.

Related Resources:
  
• How to Protect Your Business in a Divorce (Inc.com)