How can I protect my business during a divorce?

Your business could be at risk if you wind up getting divorced. For instance, you may be required to split earnings with your ex, or you might even lose full control of your business if your former spouse is able to claim part ownership. Inc. offers the following information to business owners in Michigan to ensure their most valuable assets remains protected.

Implement a prenuptial agreement

The best protection for your business is to create a prenuptial agreement before getting married. These agreements spell out who owns what prior to a marriage, which prevents a spouse from claiming ownership if a divorce is sought. While it can be hard to talk about prenuptial agreements, doing so is a must for business owners. 

Limit your partner’s involvement in business matters

Courts will also look at how involved your former spouse was from an operational standpoint. Accordingly, it’s best to take steps to keep business and personal matters separate, especially when it comes to finances. Try to limit involvement where you can; don’t let your spouse help out, don’t solicit ideas, and don’t let him or her have a say in management decisions.

Be careful when valuing your business

Of course, despite your best efforts, you might still be obligated to part with a portion of your business. In this case, you can mitigate some of the damage by valuing your business carefully, while still making sure you’re forthcoming about earnings. For instance, you may want to calculate the book value as opposed to the market value when reporting. The book value is the cost for initiating and running the business, while the market value is the amount the business could possibly bring in if it were sold. 

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