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4 things to consider to make your business divorce proof

Even after considering all of the risks, many entrepreneurs can’t wait to start their own business. Most know they will have to put in long hours in order to build their business, but the benefits in the end will be well worth the hard work.

Before you jump head first into the unknown, however, it’s a good idea to consider one more risk you may not have thought about: divorce. The dissolution of marriage process can leave any business owner scrambling to put legal measures in place to protect their investment, oftentimes to no avail.

4 things to consider to make your business divorce proof

Understand state property division laws. As we have said before on our blog, California is a community property state. Anything that has value that was acquired or gained after the start of a marriage is considered to be equally owned by both spouses. Because businesses have value, a business started after the start of marriage could be considered community property that would be split equally upon divorce.

Consider how property is divided before starting your business. Few business owners ever start their own business without first considering the risk that their endeavor could fail. So too should be the case for marriage with entrepreneurs. While most people don’t go into marriage thinking it will end, considering this risk before starting a business can help you realize what you need to do to protect your investment if the worst should happen.

Consider drafting a prenuptial or postnuptial agreement. Many business owners want to reap the benefits of their hard work, not see half of it go to their ex in a divorce settlement. If this is the case for you, consider drafting and signing a prenup or postnup. These are great tools for entrepreneurs because they can keep a business holding separate instead of a part of the community property.

Don’t be afraid to talk to a lawyer. It’s hard to protect your best interests when you don’t understand or aren’t aware of the applicable laws. A lawyer with experience handling family law matters for business owners is the best person to talk to, and many even offer Discreet Consultations where you can discuss the specifics of your situation.

Whether you’re planning on starting a business before you get married or after you’ve said “I do,” you should consider what will happen to your business holdings in the event of divorce. It’s a risk you hope never comes true, but you’ll be happy you planned for if it does.