Divorce proofing your business is simple if you think ahead and act decisively.
For those whose marriage is in trouble or who are about to begin a divorce,
a few simple strategies can go a long way in helping to preserve a business
and limit it's exposure to an angry, often vengeful spouse.
Once the divorce proceedings start, it is unlikely that entrepreneurs will
be able to implement some other legal maneuvers that, if accomplished
in happier times, could keep their business from landing in a soon-to-be
Keep the following short-list in mind as you enter upon your plan to divorce-proof
1. Maintain good records, and keep the family's finances separate from
those of the business.
2. Pay yourself a good salary.
3. Fire your spouse. The more prominent the ex's role and the longer
he or she worked in the business, the stronger the case a lawyer could
make that this spouse helped build the enterprise and should profit from
4. Sacrifice other assets. Try to retain 100 percent ownership of the business
by forfeiting other assets instead, such as retirement accounts, the family's
home, vehicles or collectibles.
5. Get a fair valuation.
6. Arrange to make any payments over time. A buy-out of the spouse’s
interest can be made over time instead of a lump sum payment.
7. Raise capital by selling a stake.
8. Sign a pre-nup or a post nup. You and your spouse can “agree”
that your business is your separate asset and will not be subject to equitable
distribution if the marriage ends in divorce.
9. Place the business in an irrevocable trust. This keeps the business
from being counted as a marital asset as you no longer personally own it.
10. Create a buy-sell agreement. A buy-sell agreement defines what happens
to a business should any owner's status change, as is the case in