Divorce, rare in the United States even a century ago, has become prevalent. A couple marrying today, whether in Illinois or other states, has to accept that, statistically speaking, there is a high probability that their marriage will end acrimoniously. In order to accommodate this undeniable statistical reality, many individuals with businesses are seeking to divorce proof their businesses before risking everything by saying “I do.”
A recent article offers advice in this regard. A key point of the advice focuses on getting a premarital agreement, stating that a family law attorney can draft one on behalf of the couple. These agreements, popularly referred to as pre-nups, designate an individual’s business as separate non-marital property. That status protects it from being subject to division in the event of a divorce. A postnuptial agreement can be signed if the couple is already married. It will have the same legal effect.
Partnership and shareholder buy/sell agreements can be used to block claims by the business owner’s spouse in the event of a divorce. Setting up the business as your employer is another option. If you do that, you can pay yourself a salary at a fair market rate, and keep the finances of the business separate from your personal finances.
If you’re headed to a divorce and it’s too late to pursue these options, there are still approaches you can take. One is buying your spouse out of his or her interest in the business right way. Another is setting up a payment plan to buy out the spouse’s interest from future business earnings. Whichever route you take to protect your business from a divorcing spouse, a good attorney can be invaluable to ensure your interests are safeguarded.
Source: The Business Journals, “How to divorce-proof your business” Rosemary Frank, Mar. 02, 2014
