It happens more often than you think: An entrepreneur spends months or years creating a profitable small business, only for his or her marriage to fray and spouse file for divorce. In this scenario, how does the entrepreneur protect the small business from being taken by his or her spouse in the divorce or liquified to pay off his or her portion of the marital estate? Knowing how to protect your small business is critical because failure to do so can mean the loss of everything you have worked so hard to create. At the Law Offices of Steven Gildin, our team has helped many clients protect their small businesses while going through a divorce in New York. To learn more, call or contact the office today.
Prenuptial and Postnuptial Agreements
The easiest way to protect your small business from the divorce process is with a prenuptial or postnuptial agreement. These agreements state the terms for property distribution if a divorce happens, and it can state that you retain the entirety of your business in a divorce. It can also specifically state that your spouse cannot make a claim for part of the business and may be required to sell his or her stake in the business if a divorce is filed. A prenuptial agreement is signed prior to the wedding, while a postnuptial agreement can be signed anytime after the marriage is official. An experienced attorney can help you draft a prenuptial or postnuptial agreement that works for both spouses and protects your small business.
Steps for Protection
While operating your business, there are other steps that you can take to protect your small business from a divorce in New York. First, maintain good business records and keep the finances of the company separate from those of the family. Do not use company funds to pay for something at home or vice versa. Second, pay yourself a good salary. It make seem counterintuitive, but paying yourself a good salary allows you to claim that the family was receiving their fair share from the business. If you pay yourself very little and invest most of your profits into the business, your spouse may be able to claim that he or she is entitled to some of the company assets.
If your spouse works for the company, fire your spouse. This can be done gradually, but if you believe that a divorce is imminent, you need to separate your spouse from the company. The longer your spouse worked for the business and the more prominent his or her role, the stronger the case is that your spouse is entitled to part of the company in the divorce. Finally, be prepared to sacrifice in order to keep the business in the divorce. This may mean letting your spouse take more of the other assets in the marital estate or paying off your spouse for his or her share of the business over time, similar to alimony payments, until your spouse is bought out.
Call or Contact Us Now
To learn more about protecting your small business in a New York divorce, call or contact us us today at the Law Offices of Steven Gildin now.