What could happen to your family business during divorce?

On Behalf of | Oct 16, 2023 | Business Formation

Small businesses are very common in the United States and many married couples see them as a chance to take control of their future and their finances.

If you’re thinking about starting a business, you may be wondering what’ll happen if you and your spouse get divorced. Would this put your new business in jeopardy?

You have numerous options

Many people assume that they have to sell a family business during a divorce so that they can split up the money. But you actually have a few different options that you can consider if divorce ever becomes your chosen way to move forward with your life, and selling is just one of them.

For example, you could buy your partner’s share of the business, either by making an outright purchase or trading your share of other – similarly valued – marital assets. Alternatively, you and your spouse could continue to work together as business owners, even though you are divorced. In your professional lives, nothing has to change. You just have to decide if the two of you can work together amicably once your personal relationship has changed.

Can you plan for this in advance?

One thing to consider as you start your business is using a prenuptial agreement. You may also want to use a partnership agreement so that the two of you can have an official professional relationship with a contract that you’ve both signed.

If you do this now, while the two of you are still on good terms, it can help you to better safeguard your interests – and theirs – in the event of divorce down the road. A partnership agreement can define what percentages of the business you own, what roles and responsibilities you have and things of this nature. A prenuptial agreement can help to determine how your financial assets should be divided, including the assets that you have in your business.

In other words, there are legal tools that you can use in advance to solve this problem before it even occurs. If you’re thinking of starting a business, it may be wise to consider all of these steps carefully so that you can get the proper paperwork in place. This can help to reduce conflicts, and it may protect your business from things that are outside of your control – such as your spouse asking for a divorce in the future.


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