Entrepreneurial endeavors can quickly complicate the already confusing divorce process. Not eager for your ex to be your business partner—or worse, to enjoy the fruits of your labor? Review the following to protect your business interests during and after divorce:
The Role of Valuation
Valuation is the primary source of frustration in any divorce involving extensive business property. It’s easy to value and divide a checking account or a savings account, but businesses are a whole other matter. Value may be determined based on the sales of comparable businesses, the assets and liabilities of the organization in question, or anticipated cash flow.
Separate Versus Shared Property
If you launched your business prior to getting married, much of your current property could be deemed separate. You may not be required to divide these assets equally, particularly if you had the foresight to complete a prenuptial agreement. If, however, you and your ex used joint funds to acquire business interests after getting married, that property is deemed shared, and subject to equal division.
Prior to Divorce
If you haven’t already initiated divorce proceedings, it might not be too late to protect your business interests. Try for a postnuptial agreement if you’re concerned about the possibility of divorce but not certain whether to move forward. Another option: limit your spouse’s involvement in the company; the more responsibilities a partner holds, the greater share he or she is entitled to in the event of divorce.
Paying Off Your Spouse
If you failed to protect your business interests adequately prior to marrying or while married, you may still be able to “pay off” your spouse. Aim for a mutually beneficial resolution that allows you to emerge with your business interests intact and that provides some substantial value for your ex. For example, let him keep the house, the dinette set and the Florida timeshare in exchange for his relinquishing all ownership interest in your thriving start up. If this kind of deal is not an option, talk to a qualified family law attorney about crafting a property settlement agreement. This long-term payout compensates your ex for his share of the business (with interest).
Do you need intelligent assistance dealing with the financial aspects of your Maryland divorce? The team at DiPietro & Wise, LLC can give you the insight you need to feel in control over your future. Please get in touch today for a confidential consultation.