5 Strategies To Help Protect Your Business From Divorce

April 1, 2019
Written on behalf of Daniel H. Chambers Attorney at Law, P .C.

You’ve spent countless hours building your business and you’re just now fully reaping the benefits of your hard work while facing the prospect of divorce. Since Alabama courts can divide marital property in any manner they deem acceptable, the last thing you want is to leave the decision in the hands of a judge, especially if your spouse had little or nothing to do with helping you as you nurtured your company.

Here are five strategies to help you protect your business in case of divorce.

1) The benefit of prenuptial and postnuptial agreements

Before getting married, consider creating a prenuptial agreement to protect your assets. In general, property acquired before marriage is considered separate property and not subject to property division. However, if marital property and separate property become significantly commingled, your previously owned assets could lose that distinction. A postnuptial agreement can provide protection from the risk of commingling property.

A postnuptial agreement can provide the same type of protections as a prenuptial agreement, but these can sometimes be overturned during divorce proceedings. If you do not have a prenuptial contract, having a postnuptial is better than nothing.

2) Entity type and “lock-out” agreements

When you become involved in certain business ventures, such as a partnership or corporation, many entities have agreements that require prenuptial contracts to be signed that will waive your spouse’s rights to any future interests in the company. There are often prohibitions against transferring ownership interests to any other parties without the consent of the other owners. Typically, there is also a clause in place that gives the other shareholders or partners the chance to protect their own interests by buying out you, your spouse, or both.

3) The importance of a competitive salary

Don’t invest all your earnings back into the business. Instead, pay yourself a competitive salary that benefits you and your family. If you reinvest your earnings back into your company, your spouse may claim that he or she is entitled to a stake in the business since this individual was never able to benefit from the earnings during the course of the marriage.

4) Don’t hire your spouse

When your spouse becomes involved in the operations of your business, you run a high risk of your company moving from separate property status to marital property. The more your spouse contributes to your business, the more likely he or she is to receive a larger percentage if it’s divided during a divorce.

5) The buyout

If you have done everything you can to retain 100 percent of your business but to no avail, your final option is to negotiate a buyout of your spouse. You can purchase this party’s stake through a straight cash payout or an installment agreement. You may also be able to grant him or her the majority of any other joint property in exchange for relinquishing any rights to the company.

This blog post should not be taken as official legal advice. If you need more information about divorce, it’s best to speak with an experienced attorney like Daniel H. Chambers, Attorney at Law, PC.

Mr. Chambers is a respected attorney in the Alabama legal community who takes pride in successfully negotiating favorable settlements for his clients because he never wants his clients to spend a dime more than necessary.

Mr. Chambers is also prepared to fight for you in the courtroom. He prepares every case as if it will head to trial because he wants to be ready to make the best possible arguments on your behalf at the negotiating table and in court.

Click here to get a free consultation with an experienced Birmingham, AL family lawyer.