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3 ways to help protect your business when divorcing

On Behalf of | Aug 1, 2023 | Family Law |

When you create a successful business from the ground up, you probably hope not to lose part of it when divorcing. Unfortunately, that is a risk when you get a divorce in Missouri.

As an equitable distribution state, Missouri courts divide marital property fairly (but not always equally) between spouses. You may believe your business is exempt from property division if you have been solely operating it or owned it before the marriage.  But that is rarely the case when during the marriage spouses contribute (whether financially, in time and labor or otherwise) to a business’s success and increased value.

Fortunately, there are several things you can do to protect your company in your divorce.

Divide your assets yourselves

Most states allow divorcing couples to address marital property division, including businesses, outside the court, albeit only after the court’s approval. The court will likely approve your settlement as long as the proposed agreement is not grossly unfair to one party. Generally, the division involves one spouse buying out the ownership interest of the other.  For courts are adverse to putting couples in the position of working together after a divorce.  Why? The reasoning is that if a couple could not agree on decisions prior to the divorce, how can a business succeed without a common vision after a divorce?  The buyout price could be an offset to other asset divisions or paid through a promissory note.  Oftentimes, the court will require a third party evaluation of the business before approving a settlement agreement that includes a business. In many cases, the attorney representing the spouse that will ultimately own the business and operates it is must protect the client from a “double dipping.”  Double dipping takes place when income derived from a business is counted twice. First in valuing and dividing the business itself, and then again in calculating income for a spousal maintenance award.

Consider a marital agreement

Whether you are entering into a new marriage, already divorcing or merely considering the possibility, a prenuptial or post-nuptial agreement can safeguard your business and other assets. It allows you and your spouse to define how your property, including your business, will be distributed in the event of a divorce. So long as the prenuptial or post-nuptial agreement is fair to both parties and properly entered into, it should pass muster with the court and can serve as the basis for property division in divorce proceedings. Requirements include: (1) Various information about the value of subject assets must be exchanged. (2) The agreement must be in writing. (3) Both spouses must have their own attorney guiding them. (4) The agreement should be notarized.

Know the law

On the surface, equitable distribution sounds like a fairly simple concept. However, many nuances can complicate this process, especially when business assets are at stake. During the pendency of a divorce, the success of the business could be put at risk without a plan as to who has authority to make decisions. Consider learning more about property division under Missouri law to help guide decisions in respect to protecting your business interests.