Although most people do not plan for divorce, with the increase in divorce rates, asset protection before marriage may be beneficial to both spouses. Without protection, already difficult divorces may become even more difficult, especially regarding the splitting of marital property. If you and your spouse own an LLC together, a court may divide the business equally if you divorce.
When creating a business with a spouse, family member, or family friend, it is important to protect yourself.
You can protect yourself in many ways, depending on the situation.
Attorneys can draft operating agreements that outline how shares of the company can be bought, sold, or traded. When drafting your corporate documents, it is important to think about who is going to own what percentage of the company and what roles in the company those parties will play. Operating agreements should include various provisions to protect the interests of the other owners in case of divorce. For example, a provision could require an unmarried shareholder to attain a prenup from any spouse before marriage.
Additionally, you should create and maintain a separate corporate bank account for asset protection purposes.
A prenuptial agreement or post-nuptial agreement can also protect ownership of the company in the case of a divorce. These types of agreements are legally binding. You should consult an attorney to draft and review any pre or post-nuptial agreements.
If you own a business and were not able to adequately protect it, you could consider using your share of marital assets to pay off your spouse’s share in the business. This would allow you to keep your business; however, depending on your spouse’s shareholding percentage, this could be expensive.
If you have questions regarding protecting your business before or after a marriage, you should consult an experienced attorney. Our attorneys here at Boyer Law Firm look forward to assisting you with any legal need.
