Tips for Protecting a Family Business During Divorce
If you own a family business with your spouse, a divorce could be a frightening prospect in terms of the impact it could have on the business. However, there are certain ways you can protect that business in the event of a divorce.
The following are a few tips to help you accomplish this:
- Use prenuptial agreements: If you started the business before you were married, you may set up a prenuptial agreement that includes stipulations about what would happen to the company upon a potential divorce. This is particularly important if you owned the company before getting into a relationship with your spouse.
- Arrange a buy-sell agreement: A buy-sell agreement is often included in the prenuptial agreement, but can be its own contract, as well. This agreement would require your former spouse to sell any business interest received in a settlement back to the owners of the company at a price determined via a predetermined valuation method.
- Establish a trust: You may use a trust to protect the business for the next generation of owners in case one of your children goes through a divorce. The trusts would benefit only your assigned beneficiary, and anyone he or she marries would not be able to touch the share of the company you leave in the trust. Although this does not divorce-proof your company if you get divorced, it’s certainly something to consider.
- Maintain a business partnership: Some divorced partners can maintain their business relationship after they have ended their marriage. However, the emotional turmoil associated with many divorces can make this nearly impossible.
- Buy out your spouse: You may either arrange to buy out your former spouse or add a new partner who buys out that person’s interest in the company. A bank loan may be the best way to do this.
For further guidance and advice on protecting your business before, during and after a divorce, consult an experienced Long Island family law attorney with Bryan L. Salamone & Associates.