Flicker, Kerin, Kruger & Bissada, LLP
Menlo Park
San Ramon

Is your business on the line because of your divorce?

As much as you planned and prepared to begin your California business, you want to take similar steps to protect it from divorce. If your business is on the table for asset division during your marriage breakup, not only will your hard work and livelihood be at risk, but your employees, partners and clients may have a great deal to lose. Safeguarding your business against the potential for your divorce is a critical part of being a successful business owner.

Whether you began your company before or after your marriage, it takes very little for the business to become fair game for your spouse during a divorce. Marital property is any asset you acquire during your marriage, which may include profits or appreciation of a business you began before you wed.

Think ahead

Some steps you can take to keep your business separate from your marital assets include the following:

  • Draft and sign a prenuptial agreement that defines your business as separate from joint property. Be sure your agreement is fair and valid by seeking individual legal advice before signing.
  • The business budget should include a fair paycheck for you, which you use for family expenses. This will prevent your spouse from claiming you denied the family fair access to your income during the marriage.
  • Establish a buy-sell contract with your business partner that grants your partner first rights to buy your interest in the business so your spouse cannot claim it in the divorce.
  • Resist the temptation to involve your spouse in the financing or operations of the business, which may give your spouse a claim to half your business in a divorce.

Even if you take measures to protect your business, such as signing a prenuptial agreement, you will have to be vigilant not to nullify any contracts or agreements by giving your spouse a role in the company.

Is it too late for these protections?

If you are already having discussions with your spouse about a divorce and have none of these safeguards in place, you may convince your spouse to sign a postnuptial agreement in which you agree on how you will divide your assets. One option is to offer your spouse a portion of your future income from the business to cover his or her share in the venture.

There may be other alternatives available to protect your business from the destruction a divorce can bring. The counsel of a skilled attorney can be invaluable.

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