Protecting Your Business in Case of Divorce

Are you a business owner? If so, you have a lot more to lose during a divorce than just your marriage. 

According to a research study conducted by Massachusetts Mutual Life Insurance Company (MassMutual), 60 percent of business owners have no plans in place to “divorce proof” their companies.  If you own a business it is important to ensure your business and its assets are protected, especially if your business was established after you got married.  Marital property is considered community property in the state of California, which means that if your business was established during the course of your marriage, your spouse is entitled to half the business in a divorce. 

Needless to say, losing a business during a divorce has several repercussions.  For one, if a business is owned by both spouses, a divorce can “paralyze the business and create divided allegiances among employees and customers,” says Beth Wood, an assistant vice president of the Life Company Marketing division of MassMutual. Wood also says a divorce could jeopardize a couple’s wealth and retirement plans by forcing them to sell the business. Woods also adds that even if the spouses aren’t in business together, if the spouse that wasn’t involved in the business is suddenly awarded ownership in a divorce settlement it could totally rock the dynamics of the company, “throwing ownership and decision-making into doubt and distracting employees.”

Fortunately, there are several things a business owner can do to protect his/her business:

• Create a post nuptial agreement
• Create a prenuptial agreement
• Create a will or trust
• Create a buy-sell agreement