Unfortunately, as a result of the increased pressure on families as a result of the recent pandemic, we have seen an increase in the number of families breaking up and couples seeking separation and divorce.
Divorce-related searches on Google have increased in recent months.
Divorce and separation are some of the most difficult experiences you may ever have, and they are exacerbated when a business is involved. Not only are you grieving and attempting to process the breakdown of your relationship, but you must also consider your financial future, your career, and what is a fair and just way to consider allocating your assets in the divorce.
A prenuptial agreement can be a difficult topic to broach at the start of a relationship. You are essentially asking your partner to devise a strategy for resolving specific financial issues in the event of a relationship breakdown.
Many people may interpret this conversation as a lack of commitment and an expectation that you do not expect the relationship to last. Regardless of these challenges, most divorce lawyers would agree that a good prenup is a very smart investment, even if it is a difficult conversation and process to work through with your partner.
In the event of a relationship breakdown, a prenup outlines each person’s claim on certain investments or assets. Knowing how difficult negotiations can be after a divorce, a prenup can solve and reduce a lot of that potential tension.
A prenuptial agreement, on the other hand, is only a solution if you have the conversation before your relationship problems arise. If your relationship has already ended or is on the verge of ending, it is too late to consider a prenup.
GSRM has been practising family law for over 30 years and is extremely knowledgeable in this area.
Be Willing to Sacrifice Other Assets
If business protection is one of your top financial priorities as you work through a failed marriage, you may need to consider sacrificing or granting favourable terms on the distribution of other assets between yourself and your ex.
It could be your home, a vacation home, or any other asset that both of you consider valuable. If you are generous with some of these other assets, you may be able to keep more control and ownership of the business if that is your top priority.
Even if you believe you are giving up more than your fair share and that the other person is getting a better overall deal, there may be times when doing so is the best way to maintain control and ownership of your business. With a business, there is always the possibility of expanding it further, which could make it a much more profitable and valuable asset in the future than it is now. Consider that potential benefit in your negotiations.
Get A Business Valuation
Obtaining a business valuation is one of the first steps you should take when attempting to protect your business during a divorce. Having a high turnover and paying you a good wage does not always imply that the business is valuable.
Your actual ownership of the business may not be worth much depending on potential liabilities and claims against the company by other shareholders. However, you will not be able to determine this until you have received a proper, official evaluation of the business.
If you do get a valuation done, make sure your ex and their lawyer agree on the person or company doing the valuation so they don’t dispute it later.
Get The Right Business Structure
If you have the right business structure in place, you can literally save millions of dollars. The business structure, similar to a prenup, would need to be in place before you begin to experience relational difficulties; otherwise, the change in structure would be viewed as a strategic move to gain an unfair advantage in the divorce proceedings.
It is a wise business decision, similar to a prenup, not only to protect yourself from other liabilities, but also to protect you and your company in the event of a divorce.
A good tax advisor and business legal consultant can provide you with sound advice on this subject.
There are a number of proactive and reactive steps you can take to protect your business if your marriage fails. If you have the ability to establish a prenuptial agreement and a good business structure at the beginning of your relationship, you can save a lot of heartbreak and hassle at the end. However, if you find yourself in a divorce situation and do not have these things in place, it may be a good idea to get a business valuation and consider how flexible you can be with your other assets if protecting the business is your top priority.