As some Texas residents may know, a business owner may be required to offer a former spouse interest in their venture if a divorce occurs. In some cases, this may lead to disputes, which can result in a number of difficulties for the business. However, there are some steps that a person might be able to take to help shield the company from division.
For example, if the business has been established prior to the wedding, it may be plausible to use a prenuptial agreement to secure the firm from the other party. This document could designate the venture as separate property, denying the other party any claim in interest. Similar protection might be sought through a postnuptial agreement; however, some suggest that these agreements are more difficult to enforce. It may also be possible to place the firm into the ownership of a trust.
Some other preventative measures might include keeping business expenses separate from family finances. Furthermore, it may also be an important for an entrepreneur to use the business to pay a high salary. If it can be demonstrated that a family’s wellbeing suffered for the sake of the business, it may be more plausible for the other party to seek an interest in the endeavor.
While these measures may provide some amount of protection for a business, it may be prudent for an entrepreneur to seek professional assistance when becoming involved in a contentious divorce. An attorney who is familiar with divorce proceedings could help a client assert their interests in court or in negotiations with a former spouse.
Source: Entrepreneur, “How to Divorce-Proof Your Company“, Carol Tice, August 08, 2011