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How a business owner may protect against a divorce

On Behalf of | Feb 25, 2019 | Divorce |

One concern for a person in Georgia who is going through a divorce might be protecting a business. If there is a pre- or postnuptial agreement in place, this might be easier, but if the business owner has planned well and kept good records, even without an agreement, the process may proceed relatively smoothly.

For example, a company’s organizing documents can say that the company must not be transferred in case of divorce. They might establish that the spouse will be paid a cash award in case of divorce. Funding sources, cash transactions and business expenses should be recorded and kept separate from personal finances. If the spouse works for the company, compensation should be at market rates. Failing to do so could give the spouse grounds to make a more substantial claim for the business. Business owners who pay themselves a salary under market rate may still be required to pay spousal support that is calculated based on a market rate salary.

A prenuptial or postnuptial agreement can establish one person as the sole business owner and that the business will not be divided in case of divorce. However, another option is to specify a percentage of the value the spouse might receive in divorce. If both spouses own the business, they might agree to continue running it after divorce, or one could buy out the other.

A person who is considering divorce and who owns a business might want to contact an attorney to discuss how property division might happen. One alternative to paying a spouse cash or giving the spouse control of part of the business might be to allow the spouse to keep another asset of equal value. The person may also want to discuss the complexities of dividing real estate, retirement accounts and other investments with the attorney.


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