Nearly half of all marriages end in divorce in the United States, and if you own a small business, that enterprise can be at risk when you and your spouse separate. However, there are some steps that you can take to protect your business during a divorce in New York and minimize the chances of your divorce resulting in the selling or dissolving of the business you have worked hard to create. To learn about additional steps you can take to protect your business, talk to a qualified divorce attorney in New York today.
Sign a Prenuptial or Postnuptial Agreement
One of the easiest ways to protect your business from divorce is to have your spouse sign a prenuptial or postnuptial agreement. These agreements are signed before or after a wedding that dictate the terms of property distribution in case of divorce. You can protect your business interests in these agreements or bargain for the business in exchange for other items of value in the marital estate through a prenuptial or postnuptial contract.
Create a Buy-Sell Agreement
You can also create a buy-sell agreement that defines what happens to the business if an owner’s status should change. In the case of divorce, a buy-sell agreement can limit a spouse’s ability to gain ownership of the company, deprive a spouse of voting rights, or give other partners an opportunity to buy out that portion of the business.
Maintain Good Business Records
It is critical that you maintain good business records and keep your company’s finances separate from your personal finances. By maintaining separate finances, it is much more difficult for your spouse to claim that the business is a commingled asset and therefore part of the marital estate. Do not dip into personal finances to pay for something in the business or vice versa.
Pay Yourself a Good Salary
You should also pay yourself a good salary from the business in order to protect it in divorce. While this may sound a little counterintuitive, if you limit the cash flow to your family and choose to instead invest it back into the business, in a divorce your spouse can claim that he or she is entitled to a larger share of the company’s value because the family was deprived of that value during the course of the marriage. Instead of waiting until retirement or selling the business at a later date, your spouse will want that value now in a divorce.
Prepare to Pay for the Company
Finally, you should make preparations to pay to keep the company in a divorce. This can be accomplished in a number of ways. First, you can give your spouse a larger share of the marital assets in exchange for keeping the business. Second, you can arrange in your finalized divorce settlement to make periodic payments, like alimony, to your spouse until his or her stake in the business is paid out. This can come from a bank loan or from the business’ cash flow, depending on the terms of the agreement.
Call or Contact a Lawyer Now
Getting a divorce in New York can be a messy and complicated matter, but you can take steps to protect your business from the ramifications of divorce. Call or contact us to learn more about this article.