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Protecting your business assets from divorce

On Behalf of | Oct 4, 2023 | Divorce

No one enters into a marriage or business contract expecting it to fail. But the reality is, half of all marriages end in divorce, and most startup businesses in Indiana will end up failing as well. When you go into business with your spouse, there is a potential for things to get extremely complicated if you don’t plan ahead.

Expect the best, but plan for the worst

Even if your business starts out as a mom-and-pop operation, you may want to treat it as a professional business entity from the very beginning. As your business grows, other people besides just you and your spouse might become reliant on your business’ continued success. Incorporating your business and setting up operating agreements early on may protect your business from dissolving in the event of a divorce.

Set up a prenuptial agreement

A prenuptial agreement may be used to clearly define ownership of a business. Even if you run your business all by yourself, your spouse could potentially claim 50% of the business assets during divorce proceedings. A prenup could establish how business ownership is divided between spouses and whether the business should be sold after a divorce.

Place your business in a trust

Placing your business assets into a trust means that they are protected from all future creditors. Keep in mind that an ex-spouse could become a creditor if they end up suing you for spousal support payments. If you stay married, protecting your business assets in a trust will also benefit your spouse.

It’s a win-win

In the best-case scenario, both your marriage and your business remain successful and intact. In that case, all of the efforts that you put in to plan for the worst will still benefit you, your spouse and your business. At the end of your planning, you should have a business that is more organized, with clearly defined ownership and greater protections against unexpected events.