5 Actions to Take Now to Protect Your Small Business in Divorce 5 Actions to Take Now to Protect Your Small Business in Divorce 5 Actions to Take Now to Protect Your Small Business in Divorce Michele Hart Law

Date: October 9, 2018 | Author: Michele Hart

Entrepreneurs and business owners can be uniquely susceptible to divorce.

For instance, when family finances are put on the line to finance a business or the business is bootstrapped for money, this can put a strain on the marriage.

Likewise, spending the exorbitant amount of time and energy necessary for running a business can result in lack of time and energy spent on the marriage.

If you’re a small business owner and believe you and your spouse might be headed for divorce, take these 5 actions to protect your business:

  1. Pay yourself a reasonable salary.  Rather than reinvest profits back into the business, pay yourself a salary that’s used to pay household expenses during the marriage.  This will help to quantify the marital lifestyle when determining alimony.
  2. Keep your books and records clean.  Do not pay personal expenses through the business.  This will make for a smoother and much less expensive valuation of the business.  Schedule a meeting with your business accountant to review the nature and amount of your business expenses and salary draws.
  3. Track sources of funds.  Track and document the source of funds used to start and finance your business.  This is particularly important if the funds used were other than marital income or assets.
  4. Limit your spouse’s role.  Refrain from having your spouse help in running the business.  This could potentially entitle your spouse to receive a greater share of the value of the business than if profits were generated solely by your efforts.
  5. Protect the interests of other owners.  Make sure you have a valid partnership or shareholder agreement, LLC, and/or a buy-Sell Agreement to limit your spouse’s control over the business and protect the business interests of any other owners in the business.

Taking these actions sooner rather than later can help protect your business in the event of divorce.

To learn more about how to protect your business in divorce and achieve an amicable resolution, contact us for a personalized one-on-one consultation.



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