How Could a Divorce Impact My Business?
Although many divorcing couples anticipate that ending their marriage will impact their financial situation and personal lives, few take into account how their business interests could be affected by the termination of their union. Fortunately, it is often possible for couples to come to a fair settlement agreement in which the business’s owner remains in full control of that asset, while the other spouse is compensated for his or her portion.
There are, however, alternative options for those who wish to continue running a business together or who decide to liquidate the company entirely. Which route a couple takes depends on the specific circumstances of the case, so if you or your spouse own a business and are planning on filing for divorce, you should contact an experienced property division lawyer who can help you come up with a solution that is in both of your best interests.
Dividing a Business
Couples who establish businesses after getting married or who own a business prior to marriage, but fail to create a prenuptial agreement to protect it, could end up forfeiting some or all of that business upon divorce. This is because Florida family law courts are governed by the rule of equitable distribution, which requires couples to divide all marital property equitably. This applies to almost all types of assets, including real estate, bank account funds, investments, and personal businesses. Possible outcomes for the fate of the latter include:
- A former spouse becoming a partner in the business;
- A former spouse becoming a part owner in the business;
- The business being liquidated, so that the proceeds can be divided equitably; or
- One party agreeing to provide the other with a greater share of another asset in return for full ownership of the business.
While all of these options are possible, courts are generally reluctant to liquidate businesses and so will usually try to avoid it, especially if the business is the family’s main source of income. Ultimately, a company’s fate following a couple’s divorce will depend on the parties’ willingness to negotiate, when the business was established, and the parties’ other sources of income.
Protecting Your Business
Dividing a business can be complicated, so it is often in a couple’s best interests to take steps to avoid this process by:
- Creating a prenuptial agreement, which can be used to ensure that a current or future business remains separate property;
- Drafting a postnuptial agreement, which has the same effect as a prenuptial contract, but is created after a marriage takes place;
- Creating a buy-sell agreement, which ensures that a business will remain intact regardless of the relationship between two co-owners;
- Keeping personal and business expenses separate, which can ensure that a business remains non-marital property; and
- Creating a trust account for the business, so that it will not be classified as a marital asset in the event of divorce.
For help determining whether any of these options are right for you and your family, please contact our legal team today.
An Experienced Property Division Lawyer
To speak with dedicated Fort Lauderdale property division attorney Sandra Bonfiglio, P.A. about the fate of your own family business after divorce, please call 954-945-7591 for a free case evaluation.