Two of the most exciting times in a person’s life are getting married and starting a business, but these two events are often very different. Although there are plenty of business efforts that are intended to be a joint effort from the beginning, the business ventures of one spouse is sometimes better off if it does not commingle with the marriage.
In many cases, an individual has already established their business long before the marriage, and they want it to remain theirs even after the “I do’s”
How to prepare
One of the best ways to protect a business from financial turmoil in a divorce is to take the time to address the possibility before the marriage by using a prenuptial agreement. While some consider the agreements unromantic, it is important to remember that business is not about romance.
Getting a prenup should be thought of largely as one more business transaction that is not a negative reflection on your personal relationship. In fact, taking time to discuss financial matters before the wedding can actually strengthen your ability to handle your finances in the marriage.
Marital vs. separate property
In a marriage, there can be a sense of “what’s mine is yours,” and while there are many instances where sharing is good, there are cases when things are better separated. The court recognizes that some property should be considered marital property, while other property is separate property.
Generally speaking, marital property is anything that is earned by either spouse during the marriage, as well as any property acquired during the marriage, and accounts funded with marital assets or that in both persons’ names. This includes wages earned, retirement accounts, stocks, insurance policies, real estate and more.
Separate property represents what each person had separately before the marriage began, including businesses, personal property, accounts that do not get funded with marital assets. Gifts or inheritances that are given to individuals are also considered separate property, as long as it is not put into a joint account. Whatever can be kept separate should go back to its original owner after a divorce. Marital property is divided in a way that the court deems “fair and equal” in Florida.
Keeping a business separate
Even when a business starts out as separate property, depending on how the business is funded, both with dollars and “sweat equity,” it can potentially be re-evaluated as marital property. While a prenuptial agreement is most efficient in keeping it separate, there are other steps a business owner can do to keep things separate. Some of these include:
- Getting a business valuation done before the marriage begins or as early as possible
- Not hiring or working with their spouse on business ventures
- Keeping separate business accounts and drawing a competitive salary that will be slotted for personal use
- Not paying for business expenses with personal money
- Be ready to give up extra personal items in a divorce in order to your spouse’s interest in the business
While these steps can go a long way in allowing you to keep your business your own after a divorce, exactly how assets are divided and categorized can be interpreted in a number of ways by the court. Even if you do everything “right,” there’s a good chance you will need to defend what’s yours in the event of a divorce. Having a good attorney on your side with experience in high asset divorces can improve your chances of coming out of the experience with the things that matter to you most.