Some people start small businesses to put an advanced degree to use or offer a service not currently available on the local market. Others might inherit a business from family members. Some people even buy into franchise opportunities to become their own bosses.
Regardless of how a person becomes a small business owner, they likely want to protect the company or professional practice that they run. It is their main source of income and might be their most valuable asset.
Can business owners protect their companies as separate property when they divorce?
Protecting businesses can be challenging
There are several types of separate property that are not subject to equitable distribution during divorce proceedings. People typically do not have to share assets that they acquired before marriage. They can also protect resources that they inherited.
A business could easily predate a marriage or be part of an individual’s inheritance. Although the business might theoretically seem like separate property, it may still be vulnerable to claims by the other spouse during divorce proceedings.
Frequently, business owners have to continue investing in their organizations regularly. The use of marital income to maintain or improve a business could make it at least partially marital property. If the other spouse invested in the company or performed uncompensated work for the business, their actions might also give them a partial interest in the organization.
Preparing adequately for a high net worth divorce can help people secure appropriate outcomes. People who own small businesses or professional practices may need help determining if their company is vulnerable and the best strategy for protecting that business, and that’s okay.
