The ultimate mixture of money and personal relationships is marriage. Couples who divorce in Ohio divide marital property according to state equitable distribution laws. Many Columbus spouses head into divorce without knowing the difference between separate and marital assets.
In simple form, laws allow spouses to exit a marriage with the property they brought into the legal union. The retirement fund you started five years before marriage? The first five years’ savings are yours, but the pension money accumulated during marriage may have to be shared.
What about a business? A judge could rule the business is all yours provided you started the company before marriage, never brought your spouse into the business and kept company money entirely away from personal funds. Then again, without some formal agreement, a judge might decide a business should be divided.
Divorce is hard enough without having to liquidate a business. It’s possible to keep business property separate without disturbing the “equitable” part of asset distribution. You could negotiate around a business by offering alternative assets to a spouse.
A better idea may be settling the issue before marriage with a prenuptial agreement. The contract — or an after-wedding post-nuptial agreement — can define how property is divided in the event of divorce. Adding business partners and shareholders can deflect a spouse’s claim.
If you’ve taken none of these steps and divorce is imminent, another strategy is advised. Know what the business is worth by hiring an asset valuation expert. Arrange to buy out your ex-spouse’s business share through insurance, a business loan or an investor or, alternately, set up a long-term payment plan.
The best business protection plans are early ones but, if that’s not possible, you still have options to keep your company. An equitable settlement is a two-way street. With the help of financial and legal advisers and settlement negotiations, a business’s future can remain intact.
Source: Nashville Business Journal, “How to divorce-proof your business” Rosemary Frank, Feb. 19, 2014