How to protect your business while going through a divorce

On Behalf of | Sep 1, 2021 | Divorce |

Many Texas couples who get married may also choose to start a business together. Unfortunately, this can create unique problems if they later choose to get divorced. If you are going through this situation, it’s important to be able to protect your business by divorce-proofing it. Here are ways to do that.

Document everything early on

If you create your business as a sole proprietor, you may still have to give your spouse a portion of it once you get a divorce. To prevent this from happening, you should keep documents of everything and include certain provisions that protect your interests as an owner in the event of a divorce. Provisions such as preventing the transfer of interests to your spouse without authorized approval is a good way to protect the business.

Prenuptial agreement

A prenuptial agreement protects your business if you and your spouse ultimately choose to divorce. Your business may be viewed as non-marital property. However, even if you both started it together, a prenup can keep things even at 50/50.

Postnuptial agreement

Similar to a prenup, a postnuptial agreement can help you protect your business if you and your spouse get a divorce. It can allow you to choose how much of the business each of you owns if you and your spouse become partners in the business while not having a prenuptial agreement.

Buy and sell agreements

Having a buy and sell agreement in place is essential even if you have a prenup. If you and your spouse both own the business, it can help you to come to an agreement on setting the value of the business if you later end your marriage or something unforeseen happens.

The other partners in the business are also protected with a buy and sell agreement. For example, without an agreement, the court could permit one spouse from becoming a partner even if they don’t wish to be a partner. This is a problem that could potentially be disastrous for the business.