Anyone who starts their own business naturally hopes that it will flourish and grow. For many, that hope becomes a reality, and they go on to enjoy the success of their labors. What happens, though, if you own a successful business and you suddenly find yourself headed for a divorce? How do you protect what you’ve built?
It may not be easy. In the absence of a prenuptial agreement, the company will almost certainly come into the picture during the property division process. This means you’ll need to do what you can to protect it — but hiding your assets isn’t one of the options.
One step of handling the company during the divorce is valuation. This gives the business a value that can be used during the property division process. The company’s profit and loss statements, as well as other financial documents, will play a role in this.
Once you have a starting point and know the company’s value, you have choices when it comes to dividing the company fairly. One of these is that you and your ex can simply divide the company. This provides you both with an income stream, but the terms of this must be worked out carefully and put into writing.
If that’s not a palatable idea, another option is that one spouse can buy the other out. When there are assets available to make this happen, it is usually the preferred option for both parties. It might also be possible that the company could be sold and the profits divided.
Even though it might be tempting to try to hide income or assets for the business, don’t try it. Forensic accountants look for things that point to sudden income deficit syndrome. If this is found, it can have a negative impact on your divorce because hiding assets is illegal.
Your attorney can work with you to determine what options may help you to protect your company. Think carefully about each one and make decisions based on what you feel is best for your needs.