You and your business partners may have worked for years building your business from the ground up and turning it into a successful and lucrative enterprise. Your business might be your most valuable asset. Sadly, your marriage might not have been as successful as your business was. Now you are facing divorce and the possibility that your ex could get a share of your business in the property division process. The possibility can be distressing, but there are ways to protect your business from divorce.
Some property in a divorce is marital, while other property is separate. Marital property may include anything either spouse earned during the marriage. Separate property is owned by one spouse either before the marriage, as a gift during the marriage or as a personal injury award for pain and suffering. However, separate property can transform into marital property if it commingles with marital assets. Marital property will be divided equitably in a divorce, while the separate property will remain that of its owner.
A prenuptial agreement executed before marriage can designate your business as separate property. As long as the prenup is valid, your ex will not have a right to a share in the business if you divorce. That being said, the prenup must be drafted in a way that makes it legally valid, or it could be overridden.
“Locking out” your spouse
If you have a partnership agreement, shareholder agreement or operating agreement, you can include provisions that address the topic of divorce. For example, the agreement can prohibit the transfer of shares unless all other partners or shareholders agree to the transfer, or, the agreement could state that all partners or shareholders be given the right to purchase a divorcing partner’s share in the business.