Heading for a Divorce? Learn How to Guard Your Business



For business owners, it is a common wish not to allow their ex-spouse to become a partner of their business. If you are going for a divorce, here is how you can protect your business, which is probably the most valuable financial asset owned by you.

Depending on your personal situation, your spouse may obtain up to 50 percent of total share in your business after a divorce. The necessity of safeguarding your business arises from the reality that it is less likely for you to adapt to a new equation after a divorce that allows your ex-spouse to continue remaining a partner of your business. The question is how to do it.

Take a Note of Some Important Pieces of Advice

You should have a solid protective method in place even before the very thought of separation strikes your mind. Yes, you have guessed right; signing a prenuptial agreement even before marriage is a good idea. However, you should be done with the necessary techniques including transfers to an irrevocable trust years in advance.

Depending on the specific fraudulent transfer laws in your state, you have a time limit up to seven years to void up the transaction after transfer. In absence of a prenuptial agreement, if either of you or both of you are willing to go for a divorce, it may be too late to adopt any preventive measure.

Followings are some basic differences between individual and marital property:

Though differences are not the same in every state, individual property includes:

  • An inheritance obtained by only one spouse
  • A gift bestowed upon only one spouse by a third party
  • Property that a spouse owned before marriage

Separate or individual property can lose its status if and when commingled or mixed with marital property or vice versa. Any property acquired during marriage, irrespective of how the property is titled or which spouse owns it, is considered marital property.

Marital property comprises all assets and income acquired by either of the married couples during the marriage, which includes but is not restricted to Pension plans and other retirement plans, stock options, deferred compensation, country club memberships, life insurance, annuities, commissions, bonuses, savings, checking, CDs, professional practices, real estate, cars, boats, antique, art, tax refunds, limited partnerships and tax refunds.

In many jurisdictions, if the value of your individually owned property increases during the marriage, that increase becomes a part of marital property.

Prenuptial Agreement

A prenuptial agreement refers to a contact signed by both spouses before their marriage and comprises details about their property rights as well as expectations upon divorce. A well-drafted prenuptial agreement overrides both Equitable Distribution and State and Community Property laws. The court also respects prenuptial agreement and therefore, it’s a very powerful tool to protect your business.

However, prenuptial agreement can be very tricky. Therefore, it is very important to get a prenuptial agreement properly drafted. For a strong and well-drafted prenuptial agreement, each spouse should have his or her own attorney to be represented. Prenuptial agreement, in many jurisdictions, should have some vital elements as follows:


  • The agreement should be made in writing.
  • None of the parties should hide any asset; otherwise the agreement will be declared invalid.
  • Prenup must be executed without any coercion.
  • The agreement must be signed voluntarily by both parties, preferably in presence of witnesses.

Business owner divorce cases are very complicated and you should consult a lawyer to understand its nuances.