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Keeping your business intact in a divorce

Divorce can have serious repercussions for your business. Your spouse may become a partner or partial owner, it may be sold to pay for divorce fees or your spouse could take over the entire business in property division. But there are ways to protect a business.

First, a prenuptial agreement can help resolve many divorce issues. A prenup is an agreement executed before marriage and directs what happens to assets in a divorce and property rights. The prenup should address any business that is formed before, during or after marriage and separate business and martial assets.

A valid prenuptial agreement must comply with state law and follow formalities on its execution. Both parties need to be fully transparent on their finances. They should also have their own attorneys advise them and help them negotiate.

If the couple does not enter an agreement before marriage, they may also execute a postnuptial agreement. These may not have the same legal effectiveness as prenup, however.

A postnup should be executed as soon as possible after marriage or many years before divorce to help assure its validity. Like a prenuptial agreement, parties must be transparent, separate their business and marital assets and have their own attorney.

Spouses can also enter an agreement to run the business together under a contract allowing one partner to buy out the other partner’s interest. This works if the parties remain on relatively good terms.

Other options include making yourself the sole owner of the business with the stipulation that it will not be divided or turned over to your ex-spouse. The business may also be held in trust, a partnership or buy-sell agreement.

Limiting your spouse’s involvement helps restrict their legal rights to your company. Having your spouse as a partner is especially ill-advised because they may claim part of the business or argue that they were involve in its operations.

You can try to buy out your spouse’s shares over time or trade another asset, such as the couple’s home, for their interest. You may also pay yourself a competitive salary so that your former spouse does not claim that any excess money should be paid as support during and after divorce.

An attorney can set up a legal arrangement that helps protect your business rights. They may help fight for these rights in court or negotiations.