Many people in Montgomery, Tennessee, would be surprised to hear that the national average rate of divorce in the United States is a staggering 52 percent for first marriages and an even more remarkable 70-plus percent for subsequent marriages. In fact, Tennessee is far above average, even among the top 10 states when it comes to divorce. In such a situation, protecting assets during a divorce may be a challenging task for many people, especially when the asset division involves complex assets and debt pertaining to a business, jointly owned by a husband and a wife.
However, with the help of some preventive measures, the issue of a complex division can be resolved. One way to divorce-proof a business is to sign a prenuptial or postnuptial agreement that would distinguish the business as separate and not a part of marital property. It may also be possible to lock out a spouse’s claims on the business by using partnership or shareholder buy and sell agreements. The financial aspects of the business should be kept separate from personal finances and owners should position themselves as salaried employees of the business.
In the event that it is too late for a person to take preventive measures, he or she may want to obtain an independent professional business valuation and then buy out his or her spouse’s share in the business with other assets that are available. A person may also draw a payment plan utilizing future earnings from the business and buy out the marital share of the other spouse. Another option that a person may choose is to find an investor. He or she may also opt to borrow take a loan against collateral or a life insurance policy.
Irrespective of whether a person is prepared or unprepared for a complex asset division, it may be a wise decision to consult a lawyer. In addition to business assets or debts, an attorney may also be able to guide an individual regarding other issues related to complex property division such as stock options, investments, 401(k)s, 403(b)s, pension plans and other employer-provided retirement accounts.
Source: Bizjournals.com, “How to divorce-proof your business,” Rosemary Frank, Feb. 19, 2014