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6 Ways to Protect Your Business from Divorce

As a entrepreneur, you’re very protective of your business. After all, it took a lot of blood, sweat and tears to reach your position in life. And unless you built your business with your future spouse, there’s a good chance you want to keep him or her out of it if the two of you should get divorced.

Here are six ways to protect your business from divorce.

1. Sign a Prenuptial Agreement

One of the most effective and simplest ways to divorce-proof your business is to sign a prenuptial agreement. Not all prenups are ironclad, but working with an experienced divorce lawyer will help increase your chances of the agreement standing in court.

Both of you will need to have your own, separate attorneys for a prenup to be valid. You must both also disclose all of your liabilities and assets.

A prenuptial agreement will clearly identify your business as separate property, so your spouse will not have a stake in the company should you divorce. Without a prenup, your business may either be divided, or your spouse may wind up being your new business partner.

2. Keep Your Spouse Out of the Business

In some cases, judges rule in favor of a spouse despite having a prenuptial agreement in place simply because the spouse played a role in growing the business.

By keeping your spouse out of the business entirely – both financially and in the decision-making processes – it will be harder to prove that he or she had a hand in your business’s success.

While you’re at it, make sure that there’s no commingling of your personal and business finances. Keep your assets separate, so they may not be considered marital property.

3. Create a Buy-Sell Agreement

A buy-sell agreement can also keep your spouse out of the business in case of divorce. Sometimes called a “business will,” a buy-sell agreement would allow your other partners to buy out your share of the business to keep your spouse out of the company.

Consider having flexible payment terms in the agreement, such as a down payment and installment payments over a set period of time to pay off the remainder of the share.

4. Call On the Help of Professionals

When it comes to protecting your business assets, it’s best not to go at it alone. Call on the help of professionals, such as business lawyers, financial planners and advisers to help shield your business from a potential divorce.

A team of professionals will provide you with the expert knowledge and advice you need to make an informed decision.

5. Be Willing to Sacrifice Other Assets

If it’s already too late and you’re headed down the road of divorce without protection, you may still be able to save your business. Sacrificing other assets, like your home or car, may increase your chances of being able to retain ownership of your company.

While not guaranteed, you’ll have a higher chance of keeping your business if you have other assets that will satisfy the value of your share in the company.

But if your soon-to-be-ex wants to push the issue, you may be at the mercy of the judge.

6. Set Up a DAPT

If you have no interest in signing a pre- or post-nuptial agreement, a DAPT (domestic asset protection trust) may shield your assets. A DAPT transfers ownership of your company into a trust. The trust then becomes the legal owner of the company, which removes it from the marital property equation.

This type of arrangements will work with most entities, but may not work with S Corporations. Be sure to work closely with an attorney when establishing a DAPT.

When you say “I do,” there’s no guarantee that your marriage will last forever. If you’re a successful entrepreneur, take the time to protect your business before you walk down the aisle to prepare for the “what if.”