If you own a business, you probably consider it your most valuable asset. You have likely spent countless hours helping it become the successful business it is today. However, if you’re married, then you need to be prepared for the possibility that you could lose a large percentage of your business in a divorce.
All marital assets are subject to division in a divorce, and a business is no exception. Maryland is an equitable distribution state, so assets are split based on what is fair. This means that your spouse could end up owning half of your business after a divorce.
It’s safe to say that you probably don’t want your ex-husband or wife as your business partner after a divorce. Even if you’re happily married now, it’s a good time to think about the ways in which you can protect your business in case your marriage doesn’t last.
If you owned your business before you got married, then the best thing to do would be to get a prenuptial agreement before marriage. A prenup outlines expectations for both parties in the event of a divorce. You can include things such as alimony and asset division. You can state that your business is to be 100% yours, but you can offer something else in exchange, such as the marital home or cash. A prenuptial agreement must be signed by both parties, without coercion or force. There must be full disclosure and both parties must agree to everything in it.
If you failed to get a prenup, or you started your business after you got married, the good news is that you can still protect it with a postnuptial agreement. A postnup is like a prenup, but it is executed during the marriage. In Maryland, there are no strict requirements for postnuptial agreements. The state uses standard contract law. However, postnuptial agreements are often scrutinized because once a couple is married, they are giving up on certain rights by executing a postnuptial agreement. However, a postnup is better than no agreement at all.
Businesses are cash hogs, but don’t forget to pay yourself. If you put all your profits back into the business, your ex-spouse could claim that they did not benefit from your business during the marriage. Therefore, they might seek more assets or a higher percentage of your business in a divorce.
Many people try to involve their spouses in their businesses, but this can be a bad idea once the marriage is headed for divorce. The more you involve your spouse, the bigger the share they can get in a divorce.
Divorce is complicated enough. When a business owner divorces, things get even more challenging because splitting up a business is not an easy task.
If you own a business, protect it with a prenuptial agreement. If you’re thinking of ending your marriage but have no protections in place for your business, an amicable divorce is highly unlikely, but the Columbia divorce attorneys at the Law Offices of Todd K. Mohink, P.A. can help. Schedule a free consultation today. Fill out the online form or call (410) 774-5987. We have two offices to serve you.
7310 Ritchie Highway, Suite 910
Glen Burnie, MD 21061
30 Corporate Center
10440 Little Patuxent Parkway,
Columbia, MD 21044