Most spouses are well aware when their marriage has been floundering for a while, and they are heading for a divorce. Of course, getting a divorce can be very painful and difficult because most couples anticipate marrying for a lifetime. For business owners, there is an additional layer of stress when faced with a divorce. Realistically, no one likes to part from their hard-earned assets, but business owners tend to have an emotional bond with their business. They worked hard building the business, sometimes it’s their brainchild, and business owners tend to go above and beyond building the business. The thought of losing the business is horrifying, and we are here to share some proactive steps to safeguard your business and allow you to retain control of the business. Let’s discuss practical strategies to keep your business intact during a divorce.
1. Know Your Numbers.
Knowing the legal structure of your business is crucial. Different types of business structures, such as sole proprietorship, partnership, limited liability companies (LLCs), or corporations, can impact how your business is treated during divorce. Consult with an experienced family lawyer who can guide you through the legal implications of your specific business structure.
2. File Your Taxes.
Keeping meticulous and organized financial records establishes a clear picture of your business’s value and financial health. Detailed records and statements can help prevent exaggerated claims during divorce proceedings. Solid financial documentation includes documents such as your tax returns, profit and loss statements, balance sheets, and bank statements.
3. Share Your Financial Documents With Your Attorneys as Soon as Possible.
When your attorney can review realistic Profit & Loss Statements and balance sheets, your attorney can create an initial estimate and determine a strategy. An additional benefit is that knowing what to expect may relieve some stress for you and at least allows you to prepare accordingly. If you do not have financial documentation available, you should expect additional litigation during the discovery process.
4. Separate Business and Personal Finances.
Although it is common practice for business owners to expense certain expenses that tend to be personal expenses, this practice, especially when taken to an extreme will likely increase the cost of litigation. Keeping separate bank accounts and credit cards for your business and personal income and expenses will allow you to demonstrate the true value and profitability of your business. If you have historically not separated these expenses, the best course of action is to proactively discuss this issue with your attorney because you should anticipate that the opposing party and counsel will pursue a clear picture of your finances.
5. Hire Experts Early.
Appraise your business to determine its fair market value. Hiring a professional business valuator can help ensure you create an advantageous assessment. This valuation will provide a foundation for negotiations, asset division, or potential buyout options. Understanding your business’s worth is vital for protecting its future during a divorce. An experienced family law attorney can assist with the selection process of an experienced expert that is best suited for your situation.
6. Explore Buyout Options:
When possible, consider a buyout. This option involves buying out your spouse’s share of the business, thereby retaining sole ownership. Your spouse may opt to receive the marital home, a monetary equalization award or sometimes a payment plan to pay off your spouse’s share of marital assets. An experienced attorney can help negotiate a fair buyout price and structure the terms in your favor.
7. Seek Mediation:
When going through a divorce, consider mediation as an alternative to litigation. Mediation allows both parties to work cooperatively, potentially reaching a mutually beneficial agreement on property division, including the business. With a neutral mediator, the process becomes less adversarial, preserving the interests of the business and avoiding unnecessary legal costs.
Conclusion:
Protecting your business during a divorce requires careful planning, legal guidance, and a clear understanding of your rights and obligations. By taking proactive measures and following the above strategies, you can increase the chances of keeping your business intact and safeguarding your financial future. To start the planning process or receive advice during the ongoing divorce proceedings, contact the experienced divorce attorneys at Kraayeveld Family Law at 616-285-0808.
