As the owner of your own business, you likely have more responsibilities than you can handle. After all, being a sole proprietor means that only one person is responsible for everything in the company. That means if something goes awry, it’s usually your fault.
While divorce may not seem like a big deal to some people, it can be incredibly detrimental to finances if left unchecked. Fortunately, there are several ways to protect your business from divorce so that it doesn’t negatively impact your financial stability in the long term.
- Don’t Keep Things Personal
One of the biggest mistakes business owners make when dealing with divorce is making it about them instead of the company. If you take the negative aspects of your marriage out of the equation, you will likely come out of a divorce with a positive financial outcome.
That’s because divorce is rarely about the people involved but rather the issues that come with it. By focusing on the problems associated with divorce, you can protect your business and your finances from the negative impact of divorce.
- Sign a Prenuptial Agreement
One of the essential things you can do to protect your business from divorce is to have an agreement outlining how the company will be distributed should you split up. It’s important to write in martial agreements and signed by both spouses.
A written agreement is important because it acts as a sort of safeguard against misunderstandings and miscommunications. In written form, there’s no chance for confusion to arise because both parties were present and involved in making the agreement.
An agreement is also essential because it can help protect you and your company against divorce. For example, if you and your spouse agree that the company should be divided evenly, then there are no arguments to be made later.
A good place to start is by consulting a family lawyer. They will be able to advise on what steps you should take to protect your interests during the process.
- Take a Good Amount of Salary
One of the most common mistakes that business owners make during marital separation is dramatically cutting back on their salary. When this happens, there’s a high chance that some of the business’s cash flow will be disrupted.
What’s more, this can create a cash crunch that makes it difficult to meet everyday expenses. Luckily, there is a solution to this problem, which lies in the fact that you should take a good salary during marital separation.
By taking wages, you can ensure your safety and secure your future. Doing this ensures that you have the cash flow needed to run your business, whether paying bills or offering your employees a full and fair wage. This way, there’s no danger that your ex-spouse or vice versa will take it.
- Don’t Involve Your Spouse in Your Business
One of the worst things that you can do during marital separation is to hire your spouse. While it’s tempting to do this to save money and eliminate the need to hire a full-time employee, this is not a good idea. Why? Well, in most cases, hiring your spouse is a clear violation of the non-solicitation clause in your marriage agreement.
This means that you’re not allowed to hire your spouse, whether that be because they have a different skill set or they want a higher salary than you would. By hiring your spouse, you’re putting yourself and your business at risk.
While it might seem like an easy solution, it can hurt your business. Hiring your spouse can lead to conflicts of interest, which can cause issues with clients and employees. Additionally, separating assets and liabilities between spouses can make it difficult.
- Don’t Use Your Spouse’s Money
Another tip to protect your business during marital separation is not mixing the business’s money with the spouse’s money.
Separating your finances makes it difficult for your ex-spouse to mix your money with theirs. This means they will have to come up with the money to pay bills and operate the business independently.
This can be a challenging task because it’s likely that they will be operating without the same resources that they had during the marriage.
- Make an Equal Valuation
Another thing that you can do to protect your business from divorce is to make an equal valuation of the company. An equal valuation is a valuation that takes into account all of a company’s physical assets and the value of the business’s intellectual property.
This valuation can then be used in court as proof that the business is worth what it is being owed. Getting an equal valuation of your company is important because it helps protect your company’s financial situation and finances.
After all, if the company is worth less than what you estimate it to be, then you won’t be left with a lien against its assets in the event of divorce.
Conclusion
Divorce can be devastating to your finances, and it’s better to make a marriage contract to solve the issue that may arise when you split up. It’s important to understand how to protect your business from marital separation to avoid financial losses and keep your employees on board. These can include an ever-changing operating environment, inadequate resources, and limited time outside of work to deal with them.
