Many married people in Virginia are successful entrepreneurs, building a business from the ground up. In addition, many of these entrepreneurs are married. However, not every marriage is meant to last. When a business owner is facing the prospect of divorce, they may wonder how to protect their interest in the business through the property division process. After all, most people going through a divorce do not relish the thought of being a business partner with their ex. Fortunately, there are still some steps business owners can take to protect their business.
One option business owners have if they have an operating agreement is to include provisions that provide all owners of the business with protection should one of them divorce. For example, there could be a clause that prohibits any shares in the business from being transferred unless all partners agree to the transfer, as well as a buy-out clause.
In addition, a business owner can protect themselves while married by paying themselves an appropriate salary. If they fail to do this, and instead simply reinvest all profits, their ex might be able to say that he or she should be awarded a percentage of the business, since business profits never went to the marital household.
Also, business owners might want to avoid making their spouse an employee of their business. If a spouse is an employee of the business or even if he or she merely contributed ideas to the business, then that spouse may have an interest in the business when it comes to property division.
Finally, if the above steps are not taken, and a business owner’s spouse does have a right to the business, it may still be possible to pay him or her off. For example, the business owners could use his or her share of marital property to purchase his or her ex’s interest in the business. Another option is to obtain a property settlement note, which would provide the business owner’s ex with regular payments in exchange for the ex’s interest in the business.
As this shows, there are ways business owners can retain control of their business in the event of a divorce. While informative, this post is not legal advice. Since every person’s situation is unique, business owners getting married or facing divorce should determine how to protect their business moving forward.
Source: Inc., “How to Protect Your Business in a Divorce,” Jeff Landers, May 25, 2010