When it comes to divorce, Tennessee courts follow equitable distribution laws to divide marital assets. Despite its name, these laws do not mean an equal 50-50 split but rather a fair division based on various factors. If you are a business owner, this process can bring a daunting prospect, making you wonder if you will lose control or ownership of your enterprise. What steps can you take to safeguard your business interests and make sure your years of hard work are not compromised in case your marriage ends?
Planning before divorce
A prenuptial ort postnuptial agreement is among the most effective ways to protect your assets. For entrepreneurs, this document allows them to specifically outline business provisions, shielding it from being considered marital property. These marital contracts can also address issues like valuation methods, buyout terms and division of debts.
Avoiding commingling assets
Commingling assets happens when you mix your separate property with marital property. For instance, if you use your personal bank account to pay for company expenses or put business income into your shared marital account, you are already committing this crucial mistake. This can blur the lines between your separate property and the marital estate, making it difficult to split assets during divorce.
Utilizing trusts
Trusts can be a helpful tool to protect your venture during a divorce. Both revocable and irrevocable trusts can create a barrier between your business and personal assets. This separation can make it more difficult for your spouse to claim part of your enterprise if you divorce. If you think a trust might be right for you, it is best to set it up long before any talk of divorce. The timing matters because courts look at when you created the trust. Setting it up early shows it is part of your business planning, not just a way to hide assets.
Divorce-proofing your assets
Your company is more than just an asset – it is a testament to your hard work and dedication. You have poured countless hours into building it, and it deserves protection. By taking steps to safeguard your business now, you are not just protecting your present but investing in your future.