Best Way to Divorce-Proof Your Company


When people get married they believe everything will go as planned. But in reality, this is not always the case. Sadly, 52% of all first marriages end in divorce. Divorce is always difficult for everyone involved, but it tends to get even worse when one of both of the partners owns a company. Probably, it is the most valuable financial asset you have and putting it at risk is the event of future divorce is not really a good idea. Depending on circumstances, your spouse might be entitled to 50% of your company and can remain your business partner. In case you do not want this to happen, you should try to divorce-proof your company. And here it is how.

1Know When Your Spouse Can Claim a Percentage of Your Company

First of all, it is very important to know in which cases your spouse has the rights to claim that he or she is entitled to a percentage of your company or money compensation. Your spouse can do this if he or she has been employed by you or your company. This can also happen if your spouse has played a role in any aspect of the business, including contributing business ideas and running the company. The more important role your spouse played in your company the higher the percentage he or she can claim to.

2Do not Reinvest Too Much Money in the Company

This is something many people tend to overlook when they own a company. They choose to reinvest a large portion of money they earn back into the business. In case you do not pay yourself a competitive salary, your future ex-spouse might claim that he or she had no financial benefit from your company and can decide to claim rights on a portion of it. If he or she can prove that you invested money in the company instead providing it for the family, chances are you will lose a percentage of it. That is why you should never reinvest too much money into your business. Instead of letting the money flow into your business, a proper portion of it should always be reserved for your household.

3Get Help from the Professionals

During the divorce, you and your partners may struggle to divide all the marital assets, especially your business. An agreement that suits both sides can rarely be made between two ex-spouses and in that case the best option is to contact the professionals. There are companies who can help you start a divorce and divide all the marital assets. It is important to get the whole process going properly from the very beginning if you want to make sure your business if fully protected. In case you are filing for divorce in California, you can contact experts who can guide you through the whole process.

4Know What to Do If Did not Divorce-Proof the Company

Sometimes it can be too late to start thinking about divorce-proofing your company. If for whatever reason you did not manage to do so, there are some ways you can pay your spouse off and not have to deal with him or her as your business partner. First of all, you can use a share of your other marital assets such as cash or real estate. If you cannot agree on the amount, you can also think about selling your business and dividing the sales price. Of course, this is the least favorable option but in some cases a different agreement cannot be made between ex-spouses.

Going through a divorce is never easy and having to reach an agreement over a business sure does not make it easier. Still, it is very important to find a way to go through with the whole process so that both sides can move on completely. This is especially important for the families with children as a difficult divorce can have a negative impact on children.

About author:

Tracey Clayton is a full time mom of three girls. She feels she knows a thing or two about raising happy, healthy and confident kids. Her motto is: “Live the life you love, love the life you live.”