Divorce attorneys hear the same story over and over again: A husband or wife builds a successful business from scratch. As the business grows and thrives, only the founding spouse is involved and their husband or wife wants no part of it until...the divorce. Sometimes, the other spouse isn’t even that interested until they find out how much it’s worth and suddenly, they want half.
This story scares entrepreneurs, so much that some of them delay a much-needed divorce out of fear of having to sell their business and split it with their spouses. If you’re a business owner, you’re painfully aware that if you get a divorce, you could lose part or even all of it.
Even if your started the business before the marriage, any growth of the company after the marriage could be classified as “marital property,” meaning it’s subject to division in the event of a divorce.
Taking Protective Measures
“What I’m the one who put all the blood, sweat, and tears into the business while my spouse had no part of it?” In the context of New York’s divorce laws, none of that matters to the family courts if you haven’t taken any steps to prevent it from happening.
There are ways for people to divorce-proof their businesses, but the steps need to be taken well-before the divorce action is filed. One example is a prenuptial agreement – it’s one of the best protective measures. If you’re already married, it’s not too late. You still have time to draft a postnuptial agreement, which offers the same protections as a prenup.
The third option is transferring your ownership interest to what’s called a Domestic or Foreign Asset Protection Trust. If you’re engaged, your fiancé does not need to provide their signature. However, since trusts are complicated legal entities, not all business structures can be owned by them. If you’re engaged to be married, give yourself plenty of time to consult with an attorney about placing your business in an asset protection trust before the big day.
Next: CEOs: Is Your Marriage Okay?
The best time for entrepreneurs to shield their businesses from divorce is before they get married. If you’re already married but considering divorce, reach out to our firm for a confidential consultation about what can be done to divorce-proof your beloved business.