There are some businesses that have no employees or staff other than the owner. This type of business generates a huge amount of income collectively for our economy. If you find yourself in this large segment of the economy and you are married or about getting married, you will be advised to consider how to protect your investments, just in case your marriage goes south. Many people wish to have a lifetime married life, but the truth is about 50% of all American marriages end up in divorce each year, according to onlinedivorce.com. So it pays to plan ahead.
Some of the entrepreneurs running a big company do undergo some difficulties in their relationship at times, maybe being occupied by their business activities, they have just a couple of time to spend with their spouses. When a business owner is effortlessly putting in long hours to build his business, his or her marriage can fray and when their spouses find it too complicated to handle, it might lead them to file for a divorce.
While running a large company along with divorce preparations, might be too devastating and can result in disasters like losing your business to your ex. In order to protect your business and keep it from landing in a soon-to-be ex’s possession, there are some legal maneuvers needed to be implemented in happier times before any complication or divorce later in the future. Just like TERESON DUPUY, founder of FUZZIBUNZ who lost her online cloth-diaper business to her ex. It took Miss Dupuy several years before she could regain her company back. She paid a large lump sum of $15000 to her ex-husband on a monthly basis for many years.
HOW TO PROTECT YOUR COMPANY FROM THE DIVORCE
As a CEO, protect your interest from the start with a premarital agreement. If your business existed before you wed, designate it as a business owned by you alone, a premarital agreement can simply state that the business belongs only to the spouse that founded the business, or it can also specifically describe the property owned by each spouse as agreed before the marriage and also delineate the anticipated distribution of assets in the event of divorce. It’s like having your spouse waive any claim in the future by spelling out your preexisting business assets. If you didn’t execute a premarital agreement, and you’re about to witness a divorce, your business might be in play.
Assessing the level of your spouse involvement in your business. A spouse that lacks involvement in your business has a reduced claim to your business value. Because it’s best if your spouse doesn’t contribute to your business management or if she’s not an employee, and does not provide business innovations. If you’re yet to witness any sign of divorce in your marriage, start now to document your spouse lack of involvement in your business.
Sacrifice other assets. During divorcement, couple’s total investments are added up and then divided equally. But to retain a 100% ownership of your business, try to forfeit other assets instead, such as retirement accounts, the family home vehicles etc. Fire your spouse. If your spouse is involved in your business affairs, ease him or her as soon as possible. Because the more prominent the spouse role and the longer he or she worked in your business, the stronger the case. Your spouse’s lawyer could say that your spouse helped build the investment and should profit from it.
Set up a trust owner of the business. Another legal structure that could protect assets in the event of divorce is a trust. It is a legally separate entity from the settlor and trust can own real estates and bank accounts. As a business owner, you can legally transfer your business assets to a trust to protect your business. Trusts are not or must not be registered as a business with the state. It requires proper execution of your trust documents. And the trusts also have their own identification number, further demonstrating their separation from the owner of the business.
Get a fair valuation. You can use a normal court-appointed valuation and then arrange for another outside party to recheck the figures before a move into conclusion and agreement. Dupuy wishes she had challenged FUZZIBUNZ’S valuation, that was based on a projection of 10 years of future growth, rather than current revenue. Secure an early postnup. This is much like a prenup, except if the agreement is signed after the wedding. If a postnup is done long before the marriage disintegrates ideally more than seven years before the breakup, it might be of help in defining a business as separate property. But judges often view postnups skeptically.
Create divisions between legal, financial and emotional issues. Divorcing your partner is more than a legal split. If you both are working together, you’ll need to sort out how to best deal with your business, finances, any children you may have and more. “Create ways so they don’t get the [legal, financial and emotional] issues mixed up. When you’re breaking up a romantic relationship, the tendency is to allow personal issues to complicate business relationships and vice versa. Take time to set your specific needs and ideal outcomes are in each area, with concrete and separate goals and plans.
A divorce is a difficult and complicated process, especially when the kids are involved. It is something that is unplanned for and can happen at any time in a relationship. You need to plan ahead and make sure this process doesn’t affect your business in any way. Like most people would say “we are married and we love each other, we don’t need a commercial document.” It’s natural to feel that way, but unbearable circumstances may occur and this can lead to a couple getting a divorce.
It’s rare that businesses end up being sold off to satisfy a divorce settlement because it’d deprive the business owner of the future income needed to pay support payments. Take action while your relationship is still rosy, and you will increase your odds of standing a divorce with your business intact. Your business should start off right and get your house in other with a document that is legally clear. Because it protects the business and the founder in case of an unexpected divorce or dispute and makes it easier to fairly distributes and business interests.
JEFF BEZOS went on a divorce agreement and lost millions of shares of his company stock during his divorce because the company founder announced he was parting ways with his spouse.
DMITRY RYBOLOVLEVA who divorced his wife suffered a great financial loss. The Swiss court ordered him to pay his ex Elena RYBOLOVLEVA a some of $4.8 billion and 64 clients which are half of his fortune.
Same with BERNIE and SLAVICA ECCLESTONE during their divorce. If they had well premarital planning, their divorce would not have caused the splitting of their investments and losing a huge amount of money in the process.
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