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Protecting the family business during a divorce

On Behalf of | Aug 21, 2019 | High Asset Divorce

When two entrepreneurial minds in Wisconsin marry, the results can be amazing. The couple works hard together to build something that not only supports their own individual ambitions but provides for their family. Over time, they develop not just financial attachments to the business, but an emotional attachment as well.

Many people may wonder then, what happens if the couple splits up? What is the best way to decide who gets what without ripping the business to shreds? Luckily, there are a few options couples can explore if they are willing to work together and arrive at an amicable solution.

Start off with a prenup

According to MarketWatch, if the business began before the marriage, it is a good idea to get a prenuptial agreement. This details what happens to the company in the event of a split. While the best time to create an agreement is before the marriage, it is not too late to get one afterward. These are called postnuptial agreements

Protect inheritance with a trust

Current business partners are not the only ones who may go through a divorce. Children who inherit businesses may later face one too. Proactive parents may gift stock in the business to their children in a trust that benefits only them. As long as the gifted stock or money stays within the trust, their future exes may not be able to touch it in a divorce.

Let one person have it

Not everyone plans proactively for a breakup. So, if the divorce has already occurred and no provisions were made, Forbes recommends letting one person keep the business. This is the most common option that divorcing couples resort to. In most instances, the more involved business partner buys out the other partner’s interests and continues to manage the business alone.

Remain business partners

To some couples, continuing to work together may seem unthinkable. However, not all marriages end in chaos. Perhaps the ideal way to make this happen is to have only one partner run the business, while the other maintains a financial interest as a silent partner.

Sell the business

If the couple can reach no amicable agreement, then the other option is to simply sell the business and split the money. They can then use that money to start individual businesses or invest in something else. The main disadvantage of taking this route is that it can take a long time to sell the business, which may tack on extra months or even years to the divorce process.