As a small business owner, you want to protect your livelihood. You have spent many countless hours nurturing your business and transforming it into the thriving source of income it is today. For many people, and especially now as more individuals start to work for themselves, their businesses are their most important and most financially significant asset.
Like many other small business owners in Colorado, you could someday face divorce. No one plans to be divorced, but research shows that up to 40 percent of marriages end in divorce. If the business is included in the financial settlement of the divorce, it can have a big impact on its future profitability. Luckily, there are strategies that you can implement to protect your most important asset.
When assets are divided during a divorce, any items that don't qualify as separate property are considered marital property. This can also apply to your business. So if you own a business before you are married, you may want to start to protect it right away. If you expect to marry soon, you may want to draft a prenuptial agreement with your soon-to-be spouse. In the agreement, you and your spouse can set guidelines and expectations for the marriage, your separate property and marital property.
If you are already married, however, and you want to protect your business, you can opt for a post-nuptial agreement. A recent phenomenon, the postnup is extremely similar to a prenup, except that a couple creates the document after the marriage. These documents are sometimes scrutinized more closely than a prenup, but they can still be a useful tool for a person who wishes to define and protect separate property.
Other planning strategies
You can also use several other strategies to reduce the impact of divorce on your business. Some suggest that you pay yourself a competitive salary from the business, and make sure to use a portion of the compensation so that you have a record of contributing to household expenses. Another strategy used by some business owners are shareholder, partnership, LLC or buy-and-sell agreements that set guidelines to protect the interests of other owners in the business if one of them gets divorced.
Making the planning process easier
Prenups, postnups, partnerships and other protective business strategies can sound extremely complex and daunting. You probably want and need to spend the majority of your time working on your business rather than stressing out about legal documents and potential legal issues. Whether you are facing divorce and worried about how the division of assets will affect your business, or if you are seeking means to protect your business from potential life changes, acquiring the assistance of an experience attorney could prove invaluable to your future.