Property disputes in a Florida divorce are not limited to disputes over marital assets such as the house or bank accounts. A spouse’s business assets may be lost without proper planning. A proper valuation of the worth of the business is necessary. This allows the spouses to seek agreement over its status or division.
A spouse should prepare for trading assets in return for keeping full ownership of the business, especially in a high asset divorce. These may include collectibles, real estate, retirement plans and pensions and vehicles.
The amount of property that is sacrificed can also equal the share of the business that is allocated to the former spouse. For example, where a business is valued at $1 million and an ex-spouse is eligible to obtain half of that business, the business spouse can replace this share with $500,000 in assets.
Another option is that the spouses agree to pay off the former spouse’s share of the business over time. The goal is to pay off the former spouse as quickly as possible while keeping control of the business. These payments may come from business cash flow of the business or a loan. It is essential that this plan is placed in writing and payment records are kept. A prenuptial agreement should be considered if a spouse owns a business before the couple marries. This may allow the spouse to keep the business as separate property.
However, a prenup does not provide absolute protection. A former spouse may be entitled to part of the business by helping finance its operation or playing an integral part in it. The likelihood of division increases if the other spouse raised the couple’s children so that their spouse can run this business.
If these agreements are entered, the business owner should take other precautions. These include segregating personal and business expenses and keeping the former spouse from participating in its operation or financing it.
Finally, a buy-sell agreement may be helpful for partnerships or businesses that have multiple owners. This defines what happens when ownership changes and may restrict the spouse’s ability to obtain voting rights or ownership.
An attorney can assist with planning for these matters. A lawyer can also assist with protecting ownership rights when these matters are disputed in legal proceedings.
Source: TG Daily, “3 ways to protect your business from divorce,” May 10, 2017