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How to protect a business during a divorce

Divorce is a challenging experience for every couple. Between dividing all your belongings and changing the family dynamic, divorce changes your entire life. And it may quickly change your career if you are a small business owner.

How are businesses divided during divorce?

There is no clear cut answer for every business. Each divorce has unique circumstances that affect how the company is split in court.

For example, if you run a business before getting married with separate company accounts, you may argue the business is not marital property - assets shared by two spouses. If you and your spouse owned the company, the courts might split ownership equally between you and your partner despite any other details.

It depends on your specific situation; what is important to know is that Wisconsin is a community property state. Any marital property is divided equally among the spouses, including family businesses. It doesn't matter who earned the income or started the business because all marital property is subject to equal division.

How do I protect my company?

There are a few tips to help entrepreneurs protect their enterprise during property division, including:

1. Get a prenup - If you started the business before your marriage, work with your soon-to-be spouse to establish a prenuptial agreement. The agreement can lay out how the business will be treated should you and your spouse ever divorce.

2. Compromise - If divorce does occur, work with your former spouse to keep sole ownership of your business. Offer to buy out their shares or give them another asset, such as the house or the family boat.

3. Learn the valuation for the business - Have the court appoint a third party to learn the estimated value of the company. It will allow you to know what is at stake for both you and your partner.

4. Schedule a payment plan - If your partner refuses to give up their share, offer to make monthly payments to pay them out entirely. It may be enticing enough for your partner to agree.

If none of these tips works for your situation, you may want to have a discussion with your former spouse about how to address the business during the divorce. Afterward, consult with any business partners or legal experts about what you can do to protect your company in the future.

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Law Offices of Mark S. Knutson, S.C. | 14170 West Greenfield Avenue | Brookfield, WI 53005 | Phone: 262-649-1241 | Map & Directions