Teller Law Firm, P.C. | Divorce & Family Law

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How to protect your business interests in divorce

On Behalf of | Dec 6, 2021 | Blog, Divorce

As a Texas business owner, you’ve spent countless hours and resources building your company into what it is today. You wouldn’t want to risk losing it all in the aftermath of a divorce. Although it may seem difficult, there are many things you can do to protect your business interests in a divorce.

Set up a prenuptial agreement

A prenup is a legal contract between you and your spouse that outlines how your assets will get divided should the marriage end. If you do not have a prenup, the court may divide your assets, including your business, equally.

Consider keeping property separate

It is important to keep track of everything you own, including business interests, properties, bank accounts and investments, before entering into a divorce. Separate what belongs solely to you from those things jointly owned by you and your spouse. If you fail to do this, it can greatly impact the value of your assets in a divorce settlement.

Use buy-sell agreements

A buy-sell agreement, also known as a buyout provision, is a contract between co-owners of a business that states how the business interest will get divided if one owner dies or must sell their ownership stake in the company. If you do not have such an agreement and your spouse decides to leave the business, they may receive a significant amount of money upon selling their interest.

Rethink your decision to involve your spouse in the business

When you involve your spouse in the family business, it can make things more complicated if a divorce occurs. The courts can view your assets as shared by both of you and could result in higher legal fees to divide them properly. If possible, consider limiting your spouse’s involvement with company activities.

Alternatively, update the legal documents governing the operation and control of that asset. For example, if you and your spouse co-own a business but only one of you is actively involved in the day-to-day operation of it, consider adding provisions to your ownership paperwork that protect it against any future claims by the nonparticipating owner.

Although the divorce process can be stressful, you may prevent some of that stress by protecting your business interests. If you’ve not taken the above steps to protect your business, it’s important to plan for the unexpected.