Divorce is never easy, but certain factors can make it significantly more complicated. One such factor is when one or both spouses have an ownership interest in an active business. From a financial perspective, such a business may be both an asset subject to equitable division in divorce, and a source of income to the individual spouse owner(s) and the family. From a personal perspective, a business may represent a lifetime’s work and achievement.
A business is often one of the largest assets that a divorcing couple has to think about resolving, and it often is difficult for everyone to arrive at the same valuation for that business. That is no surprise since even the opinions of business valuation experts may vary wildly. To further complicate matters, whether or not one spouse began the business before entering into the marriage will determine how the business issue is addressed for the divorcing family. In such a circumstance, and for purposes of equitable distribution, the business may be entirely non-marital property, or it could be partly marital and partly non-marital property, or it could be considered entirely marital property.
In short, if you own an interest in an active business, or you are the spouse of a business owner, and are contemplating divorce, it is critical that you be represented by attorneys who understand the complex issues in your case and have access to the most respected financial and business valuation experts in the area. You literally cannot afford to work with an attorney who does not understand how to protect your business interests. The attorneys of Strickler, Platnick & Hatfield have represented countless business owners, and spouses of business owners, in these highly complex matters.
The best time to protect a business from divorce is before the marriage occurs. A well-drafted prenuptial agreement can allow you and your future spouse to agree about the treatment of a current or future business in the event of a divorce. Unfortunately, most people do not think about this issue until well after their marriage. Whereas a postnuptial agreement may contain provisions similar to those in a prenuptial agreement, as the name indicates, it is signed after marriage. Postnuptial agreements, therefore, tend to be somewhat harder to obtain than are prenups because once marital rights and interests have attached, spouses are far less likely to abandon them.
Even absent an agreement with your spouse, you can still take other measures to help protect your business during your marriage. If you have business partners, you should discuss appropriate measures to protect ownership of the business in the event one owner divorces, such as prohibiting the transfer of ownership or shares without the approval of all partners or shareholders.
If you are the sole owner of the business, one frequently overlooked consideration to protect the business in the event of divorce is to contemplate whether your current salary is competitive within your industry. As the sole owner, it may be tempting to take as little salary as you need and to reinvest profits in the business for purposes of growth, but this could have other unintended consequences.
The problem with many of these protective measures is that by the time you are considering divorce, it usually is far too late to implement them. Functionally at this point, your remaining recourse is to work with an attorney who understands the complexity of the financial and tax implications of divorces involving business assets—and an attorney who has the requisite experience to protect your interests.
If you are the spouse of a business owner facing a divorce, you have special concerns of your own. Your spouse may have devoted most of their time and energy to building and growing the business (which may, itself have contributed to the breakdown of your marriage) instead of focusing upon the family.
You may have taken on the care of the household, and the entire family, to allow your spouse to turn their attention to the business—perhaps at the cost of your own career or career advancement. Or you may have worked together in the business with your spouse, willingly sacrificing for the future you thought you were building together. Your name may not be on the business, but you invested in it too.
Any one of these scenarios, and countless others, require the acumen and finesse of a legal advocate who understands the contributions and sacrifices you made to help the business succeed. Accordingly, you also need a professional who can protect your present and future interests in the business.
Whether you own a business, or are the spouse of a business owner, divorce can hold financial uncertainty. To protect your interests and your investments, experienced legal representation is an absolute must. In fact, you should view your legal fees in the light of an investment in securing a solid financial foundation for your future. Yet, be cautious about whom you hire to represent you in such complex matters. You may pay as much for a less-qualified attorney as for one with a firm understanding of the business issues you now face. The skill of an experienced attorney might make a huge difference in the value of your property division share after divorce.
At Strickler, Platnick & Hatfield, we have decades of experience successfully resolving the most challenging property division scenarios, including those involving complex business interests and other complicated assets. We approach these matters with tactical precision and creative insight to protect your interests, and advise you every step of the way with your specific goals and overall financial objectives in mind.
We invite you to contact Strickler, Platnick & Hatfield to schedule a consultation to discuss your individual situation and learn how we can help you with your business issues in divorce.