Marriage is hard work. So is running a business. And while plenty of people make marriage and business ownership work, it’s not uncommon to be put in a scenario where you have to choose one over the other. Unfortunately, this usually has a negative impact on the business and its financial outlook.
5 Ways to Keep Your Business Safe
Every couple goes into marriage with an optimistic outlook for the future. While they may have their problems, the hope is that these troubles will get worked out and bliss will ensue.
The problem is that marriage often makes underlying problems worse, rather than better. Roughly half of all marriages eventually end in divorce, which means thousands of business owners deal with the challenge of protecting their businesses in divorce negotiations and proceedings each year.
If you’re currently going through a divorce – or simply want to protect yourself from a worst-case scenario down the road – there are some practical steps you can take to stay safe.
Always Sign a Prenuptial Agreement
If you’re simply looking for a way to protect yourself when you do get married, the best piece of advice is to sign a prenup. While it can be awkward to bring up the idea of a prenup with your soon-to-be spouse, it’s important (and increasingly common). Explain that you’re doing it for the integrity of the business and simply want what’s best for everyone involved – including you, your spouse, your employees, and your stakeholders.
Consider Signing a Postnuptial Agreement
If you’re already married and didn’t sign a prenup with your spouse, you always have the option of signing a postnuptial agreement. Postnups are pretty similar to prenups, except that they occur after a marriage has already happened. This makes them slightly more difficult (since assets have already become intertwined to a degree), but it’s smart, nonetheless.
Limit Spousal Involvement in the Business
A lot of couples like to work together and turn a business into a family business. While there are plenty of pros associated with running a family business, there are also plenty of cons. In the case of marital strife and divorce, this muddies the waters and makes it really hard to facilitate a clean split of assets. This gets particularly sticky when it comes to retirement accounts and benefit packages that are tied to the company. By limiting spousal involvement at all levels, you can avoid being put between a rock and a hard place.
If you and your spouse are on decent terms, you might consider pursuing mediation over a typical divorce proceeding. Mediation is private, confidential, and more civil. You and your spouse sit down with your attorneys and a mediator in a conference room (or even in your own home) and develop a customized plan/division of assets that makes both parties happy. Not only is this less combative, but it gives you the chance to protect your business.
Reach a One-Time Agreement
If your spouse has a right to some of the business, or simply won’t let it go, the best thing you can do is come to a one-time agreement that forces them to step away from the company (rather than letting them continue associating with the business indefinitely). A lump sum payment typically works.
Putting it All Together
The best option is usually to work out your differences and salvage the marriage. Not only is this the best-case scenario in your relationship, but it will also help you avoid unnecessary challenges with your business. However, when a resolution isn’t possible, the next best thing you can do is align yourself with an attorney who understands asset protection and can help you fight for your business.