You may have built a great business during your marriage with lots of hard work, risk-taking, and professional enterprise. But things can quickly get complicated for the survival of your business if you are going through a divorce. You need to take steps to protect your business assets during this process.
A seasoned family law attorney can help you understand the effects of a divorce on the ownership of your business and the steps to take to protect your company.
Impact of Divorce on Business Ownership in West Virginia
Divorce can place you in a difficult situation if you own a thriving business or where the business has significant assets. You probably don’t want to be in a business partnership with your ex-spouse after the divorce, so this can cause a big dilemma.
Even though West Virginia is not a community property state, you may end up losing part of your business during the division of marital assets. This makes it important to work with an experienced divorce attorney who understands property division laws and can use that knowledge and experience to protect your interests.
Depending on the circumstances, you may be asked to give up half of your business in the form of assets or through liquidation. Liquidation is usually not the first choice of courts, especially if the business is a profit-making enterprise with promising future growth. But if you and your spouse are unable to come to an agreement, this may be the only solution left – unless you can buy out your ex’s share in the business assets.
There are also instances when the spouse who is less interested in the business knowingly does things to sabotage it. You need to put effective plans in place to prevent these things from happening.
The Future of Your Business is at Stake in Your Divorce
Your divorce may not necessarily have an impact on the business if it was started by one spouse and the other has no involvement in it. This is especially true if it was started before the couple was married. But that said, many businesses lose their separate property status during the marriage.
For example, the increase in the value of a business can be considered marital property, and that portion of it may need to be divided between the two spouses. The business may also be considered marital property subject to distribution if the spouse contributed to it either financially or by working in it. A business formed during the course of the marriage can also be considered marital property and subject to distribution.
If it is determined that part or all of your business is marital property, there are other ways of compensating your spouse for their share of it.
Ways to Protect Your Business Ahead of a Divorce
There are ways of protecting your assets so that your business can survive the divorce. These include:
Prenups are not guaranteed to save your business, but they can be very helpful toward that end. The agreement should be in writing and signed in front of a notary or witnesses. You should understand that you cannot coerce your fiancé to sign the document. This needs to be voluntary or else a court may declare the prenuptial agreement null and void.
Of course, you can only enter into a prenup prior to getting married. If you already missed that window, then you may want to look at the next option.
Postnuptial agreements are a lot like prenuptial agreements. The only difference is that these are entered into after the marriage. These agreements can cover the same general issues, including those pertaining to your business. The challenge is getting your spouse to sign such an agreement after you are already married. At this point, the business-owning spouse has far less leverage.
This is another way of protecting your business. Buy-sell agreements are useful in protecting interests when a business is sold or a partner dies. But they can also be useful in the event of a divorce. You can have a good business attorney draft this type of agreement.
You could lose your business after divorce if your spouse was involved, whether as an employee, consultant, advisor, or something else. You may want to start drawing a salary instead of reinvesting all profits back into the business. Your ex may end up getting a healthy chunk of that income if you continue to invest the surplus back into the business.
You should also keep your business and personal expenses separate so that the business remains a separate property. It may also be a good idea to place the business in a trust to reduce your ex’s controlling rights over it in the event of a divorce.
Get a Skilled Family Law Attorney on Your Side
The divorce attorneys at Hardy Pence, PLLC will employ the right legal strategies to prevent your assets, including your business from getting unfairly divided. Our attorneys have substantial experience helping individuals protect their business interests during a divorce. To set up your free consultation, call us at (304) 345-7250 or reach us online.