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Protecting Your Business in a Divorce


Your business is likely one of the most valuable assets you own – the product of countless hours of work and a huge amount of resources. You’ve nurtured it and grown it into what it is today, so it belongs to no one but you and your partners… right? Unfortunately, many business owners do not realize that in the event of a divorce, they could lose up to 50 percent of the value of their business to a former spouse, even if he or she didn’t have any direct influence over the business.

To avoid having an ex-spouse become an unwanted business partner, it is important to address ways to protect your business long before divorce becomes a consideration. Here are some of the ways you can safeguard your interests in the event of a divorce:

  • Sign a prenuptial agreement. A well-written prenuptial agreement can opt out of New York State’s equitable distribution laws which would give your spouse a share of your business’s value at divorce. The agreement explicitly defines what will be considered separate property, what property will be considered marital, and how it is to be divided if necessary. Keep in mind the following about prenuptial or postnuptial agreements:
    • Both you and your spouse should be represented by an attorney
    • The agreement must be created without coercion
    • The agreement must disclose all assets
    • The agreement must be in writing
    • The agreement cannot be unconscionable
    • Both parties must execute the agreement with a proper acknowledgement
  • Create a postnuptial agreement. If you are already married, a postnuptial agreement is another option that can achieve the same goals as a prenuptial agreement.
  • Pay yourself a fair salary. If you reinvest most of your earnings back into your business, your spouse may claim that they are entitled to more money or a larger share of your business at divorce because of all that could have, but wasn’t, put into the household.
  • Consider using a Shareholder, Partnership, LLC, or Buy/Sell agreement to “lock out” a spouse, if necessary. These types of agreements protect the interests of the other owners of a business if one of the owners gets divorced. Any of these agreements might choose to have unmarried partners provide a prenup before they get married with a waiver of their future spouse to any future interest in the business. It could also prohibit the transfer of shares of the business without the approval of the other shareholders or partners, and further grant the right of the shareholders or partners to purchase the shares of divorcing parties to maintain their control of the business.

If you are soon to be married and are a business owner, it is in your best interests to contact Lois M. Brenner, Esq. as soon as possible to talk about the many benefits of protecting your business with a prenuptial agreement. Contact our office today to get started.