Predicting how the division of business assets in a divorce will play out is not a clear science. The judge typically has the power to make the final decision,so it is up to your lawyer to present a compelling, fact- based case as to why you should benefit by getting more from the business. If these facts are not clearly presented, the judge will be making an ill-informed decision, which may not be in your favor. This is one of the many reasons that you need not just a good divorce attorneybut the best divorce attorney.
If you are considering a divorce, there are several things that you can do to prepare yourself for the inevitable. Even if your divorce starts out amicably, there is no guarantee that it will stay that way. When there are assets or children involved, you should always hope for the best but plan for the worst. Settling outside of court is always the goal, but it is unwise to count on that being the outcome.
There are things we can do in advance that will make the division of business assets in a divorce go more in our client’s favor. Here are some suggestions to consider while planning for your divorce.
· How involved is your spouse in the business? If your spouse does notactually work in the business, do not put them on the payroll, give them a title, or business cards. While there may be tax advantages to this strategy, it creates unnecessary issues. Simply give yourself a larger paycheck and take care of the household through your earnings.
· Is your spouse on the registration documents? If you file for divorce and your spouse is on the incorporation documents, they will continue to have access to the business funds even if they are not actually working the business. This gives them the ability to act on behalf of the corporation and will tell the judge that they are involved and deserve a considerable piece of the pie.
· Does your spouse work anywhere else? If your spouse is not working, you should at least encourage them to volunteer or become involved in other community activities. This will help them transition when you do have a divorce and show further proof that they are not actively involved in the company.
· Who signs the contracts? If you want to be perceived as the primary owner of the business, you need to be the one signing all of the business contracts that your company enters into. Having your spouse sign them proves their involvement.
· What is your business history? If you have both been involved in the business, a judge is likely to look at your business history to determine if you were married when the business started and if you both worked the business full-time from when it was created to the divorce filing. If one of you temporarily worked elsewhere, that will be taken into consideration and may show that you are or are not the primary business owner.
· Business assets and debts. A judge will likely make a ruling as to the distribution ofassets and debts including the business. It is important that you have a paper trail backing up any claims you have to an asset or why your spouse should be responsible for a certain debt.
· Obtain a business valuation. The judge may require one of you to buy out the other party. If this is the case, you need to know what your business is worth by obtaining a third party report.
Divorce is complicated and never easy. While it may feel uncomfortable to plan for your divorce, prior to filing or talking to your spouse, this is the best way to protect yourself and your assets. Once the process has been started, it is difficult to maneuver as the other side may get court-ordered limitationsthat would prevent you from accessing money or making any major business decisions. Contact us for a consultation to learn how we can help.
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