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Protecting business assets from divorce an important task, P.3

Last time, we began discussing the important topic of protecting business assets from being divided in divorce. As we noted, one important issue in dividing business assets is to determine the share in those assets to which each spouse is entitled, and this can be complicated. Ideally, couples will take appropriate steps to protect their business assets well in advance of divorce, making the issue easier to address.

Again, buy-sell agreements can be a useful tool for protecting business assets, but it is important to ensure they are well-thought out and carefully drafted. Some experts point to several important items to include in these agreements: an identifiable market for the purchase or sale of the ownership interest; a means of determining the purchase price, terms and conditions of the sale; and the means of funding the purchase of the ownership interests. 

In addition to these terms, there are various other things that can be done. For purposes of this discussion, businesses sometimes require all owners to enter into prenuptial agreements prior to marriage or remarriage which require the waiver of any rights to ownership interest in the business that would arise in divorce. The exact terms of such provisions can vary.

Another avenue for protecting business assets from divorce, particularly in a family business, is to make use of a trust which provides that the ex-spouses of any family members who receive are not entitled to any share of the business assets. Setting up a trust with the right terms is important to achieve this goal.

For those who have no other option short of selling the business but to buyout their former spouse, the key then is to get the right loan to make that work. In some cases, it may be desirable to add a partner to the business or obtain investment or venture capital. In some cases, the only reasonable option will be to sell the business, though this is certainly a last resort, depending on the wishes of the parties.

Working with an attorney to plan in advance for the contingency of divorce and its effect on business assets is certainly an important matter, as a lot can be at stake. For spouses who have a claim to a business they are not directly involved in, working with an experienced attorney is also important to ensure they receive what they are entitled to by law. 

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Tannenbaum Scro, P.L.
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