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More tips for protecting your business in the event of divorce

In our last post, we discussed placing some of your business interests in a trust for the benefit of your children as one possible tool to allow you to protect your business from losses in the event of a divorce. As we said, this strategy will not only protect your business interest from your spouse, but will also protect those assets from your children's indiscretions and potential future divorces.

Here, we offer a couple more divorce planning ideas for business owners who wish to limit their losses in the event of divorce.

First, while it may be tempting to reinvesting large amounts of money back into your business to ensure its success, it is wise to pay yourself a competitive salary from the start of your marriage. The reason is that, in the event of divorce, your spouse may claim entitlement to more money or a greater portion of your business assets, arguing that they were prevented from the full marital economic benefit of the business since that money was reinvested back into the business itself. Paying yourself a healthy salary, then, can prevent losses during divorce proceedings.

Second, if you wish to protect the independence of your business, be careful about involving your spouse in business matters. If you hire your spouse or involve them in your business in any way, they may end up successfully claiming entitlement to a substantial percentage of your business assets during divorce proceedings. The greater the involvement your spouse has had in your business, the greater share they may be entitled to claim in divorce proceedings.

For those who own a business prior to marriage, prenuptial agreements can be an excellent way to establish terms for division of property in the event of divorce. Carefully planned agreements, in addition to wise business protection strategies like those mentioned above, are an indispensible way to minimize your business losses in the event of divorce.

Source: Huffington Post, "How To Divorce-Proof Your Business: Creating A Trust," Jeffrey Landers, 16 Feb 2011.

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