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Divorce-proofing your business

On Behalf of | Oct 1, 2023 | Divorce, Property Division

California is a community property state, which means that you could lose half of your business in a divorce. However, there are actions that you can take to minimize the risk of this taking place. For instance, you could put your company in a trust or include it in a prenuptial or postnuptial agreement.

Potential benefits of a prenuptial agreement

A prenuptial agreement can be used to stipulate that your company is your sole property regardless of when it was created. If you have an idea for a business that you want to start in the future, the intellectual property associated with it can be protected by such a document. It’s worth noting that discussing a prenuptial agreement with your prospective spouse may actually help to create a stronger bond, which may minimize the risk of a divorce occurring.

What to know about trusts

A trust can be used to hold your business outside of the marital estate. Essentially, it would be exempt from property division assuming that the trust was created properly and in good faith. You may also be able to protect your company against the impact of a divorce by creating an LLC, buying an insurance policy or enacting a buy/sell agreement. Taking these steps may limit what your spouse would have access to in a divorce, which may allow the brand to operate under your control after a settlement is reached.

As a business owner, it’s important to account for as many scenarios that could impact your company as possible. Taking a proactive approach may allow you to keep full ownership of your firm while minimizing the risks that vendors, employees or others may face.