No one enters into a marriage thinking that they will find themselves divorcing their spouse later on, but the fact is that many marriages do not last. If you own a small business and want to protect your business in case the marriage fails, there are several steps you can take to reduce the chances of losing all or part of your business in the event of a divorce. The following article takes a closer look at this important legal topic.
One of the best ways to protect your business and its assets in a divorce is to have a prenuptial agreement, or prenup, already in place. The prenup should state that your business is to be kept separate from the joint property that belongs to both you and your spouse, such as joint bank accounts and any equity in the home that the two of you share. It's also a good idea to have the prenup specify that any income you derive from the business, such as an annual salary, is your separate property.
Another point to consider is that loans taken out during a marriage are generally considered joint debt. So if you take out a loan during marriage to help your business, your spouse could claim that the joint debt gives them a claim to your business. Therefore, you will definitely want to address this issue in the prenup.
Although most people know about prenups, many people may not be aware of postnuptial agreements, or postnups. These documents are very similar to prenups except that they are entered into after the marriage. If you failed to get a prenup, you can still possibly protect your business by getting your spouse to sign a postnup. The postnup will state the same things as the prenup regarding the separation of your business and its assets from the joint property of the marriage. An important point to keep in mind is that not all states recognize postnup agreements, so make sure that you check your state laws.
Even if you have a strong prenup or postnup in place, this arrangement could be undermined if you allow your spouse to take part in the business in any way. Never put your spouse on the payroll, ask them for advice about the business, or involve them in any business dealings. All of these actions could be used against you in a divorce proceeding.
To learn more, contact an experienced divorce law attorney.
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