Like personal property and child custody, a spouse's business may be a disputed divorce issue. Taking steps to protect the business before the wedding may help avoid its loss during property division.
The legal form of the business is important. Forming a corporation or a limited liability corporation can help protect this asset. Being incorporated before marriage provides even more protection.
Even if the spouse is the only owner of the business, forming a corporation or an LLC is still a legal optoin. An LLC or corporation, like the creation of a trust, creates a separate entity that can own assets such as the company vehicle.
A prenuptial agreement, known in Louisiana as a matrimonial agreement, can also protect one's business at the end of a marriage. The agreement can describe the assets that will be considered as community property and an interest waiver. The other spouse may also waive any business appreciation in a prenup.
These agreements are contracts that must be in writing well before the wedding. Both parties must fully disclose all their assets and liabilities before entering a prenup.
Keeping the other spouse out of the business is another precaution. A spouse who is employed at the business or meaningfully involved in its operation may claim a substantial portion of its value. This claim will be stronger if the spouse is a business partner.
Reinvesting profits back into the business is also risky. A divorcing spouse may argue that they did not gain any benefit from the business because profits went into the company instead of the household. To avoid losing a larger percentage of the business, the business owner should receive a competitive salary.
If all else fails and a spouse is entitled to part of the company, a spouse can buy that spouse's business interest. Or, the company can be sold and the proceeds divided among the spouses and other interested parties.
An attorney can help represent a spouse in these proceedings or while drafting a matrimonial agreement. Lawyers may also provide reasonable options to business owners to protect their interests.