Florida courts treat marital assets as divisible during divorce proceedings. However, by implementing safeguards and structuring your business with proper legal documentation, you can shield your business from becoming entangled in a divorce settlement. This proactive approach of not only protects your hard-earned assets but also helps maintain the focus on your business’ growth and success. Divorce-proofing your company ensures that your business remains resilient and unaffected by the ups and downs of your personal life.
Business structure
If you choose to establish your business as a sole proprietorship, your assets will become vulnerable during a divorce and may be split equally with your spouse. Other structures, including partnerships or shareholder agreements, may include provisions that prevent the transfers of shares or interests. This may prevent your spouse from gaining control of your company after a divorce.
Prenuptial agreements
A prenuptial agreement can serve as a valuable tool to divorce-proof your business in case of a divorce. Consider including the following clauses in your prenup agreement:
•Specify that the business remains a separate property.
•Determine how to divide any income the business earned during the marriage.
•Detail the division of business equipment, intellectual property or real estate.
•Provisions that specify whether spousal support includes or excludes business profits.
•Address which spouse maintains management and control over the company.
•Include a clause that specifies that the spouse cannot start a competing business.
•Discuss reimbursements for any financial contributions your spouse may make to the business during the marriage.
Buy-sell agreements
A buy-sell agreement outlines the terms and procedures for buying or selling an owner’s interest in the company. In a divorce, a buy-sell agreement can stipulate that the former spouse must sell their ownership stake to the remaining owner. This allows you to remain in control of the company.
Taking preemptive measures can safeguard your business from the complexities of a divorce settlement. While no one wants to consider the fact that their marriage may not last, business owners who actively divorce-proof their company’s assets protect their long-term financial goals.