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How can one keep a business from going to their ex in a divorce?


Some residents of Colorado may find that despite their best efforts, their marriage has become untenable, and they are best off divorcing. Of course, with divorce comes asset division. This is especially important if one spouse owns a business, as a business owner may not be keen to let their ex have a share in the business. However, there are some ways a business owner can protect the business they put so much time and effort into.

One option business owners have even before getting married is executing a prenuptial agreement. In a prenuptial agreement, the business owner can specify exactly what business assets they currently have prior to being married. Also, the business owner's soon-to-be spouse can execute a waiver stating that they will not seek a claim in the business if the marriage does not last.

Of course, not every business owner had the foresight to execute a prenuptial agreement, or perhaps they founded their business while married. In situations like this, it is still possible to protect one's business in the event of a divorce.

First, make sure to assess how involved the non-owner spouse is in the business. If a spouse is not very involved in the business, they may have a reduced claim to it. This is especially true if the non-owner spouse is not an employee or manager of the business and does not give advice regarding the business.

Also, the type of business one owns matters. Corporations and LLCs have their own mechanisms for how ownership can be transferred. Similarly, a spouse can establish a buy-sell agreement or a living trust in order to have more control about who can claim an ownership stake in the business.

In addition, make sure to keep business assets separate from personal assets. Business owners should also pay themselves an appropriate salary. This could also lessen the claim the non-owner spouse may have in the business, as they may not have as much of a stake in the appreciation of the business.

This post, while informative, cannot guarantee any result when it comes to a person's business and divorce. Therefore, those who have questions about this, or other high asset divorce issues, may want to seek the advice of an attorney.

Source: Inc., "How to Protect Your Business in a Divorce," Jeff Landers, May 25, 2010

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