5 Ways to Protect your Business During a Divorce in Utah
Divorce is difficult enough by itself, but when we have complexities like custody, alimony, and a business, divorces can become even more expensive, complex, and time-consuming. If you are a business owner in Utah and going through a divorce, here are five things you can do to protect your business interests. Keep in mind, this is not a comprehensive list, and protection strategies should be tailored to your unique circumstances.
1. Keep Your Personal and Business Finances Separate
One of the best ways to protect your business, in general, is to keep your personal and business finances separate. This policy extends to a divorce. You should have a separate bank account for your business and keep accurate records of all your financial transactions. When money does need to be transferred from your business account to your personal account, make that transfer clear and unmistakable (i.e., avoid things like removing cash from your business account and then depositing that cash into your personal account). This can help you show that your business is separate from your personal assets and debts.
If you started your business before you were married, the need to keep business finances and personal/marital finances separate throughout the course of the marriage is paramount. Mixing the two can result in having to divide the entire value of the business with your spouse upon divorce.
2. Get a Business Valuation
If the business is a marital asset and needs to be divided, a business valuation can be an important step in the divorce process. This is where an expert (someone with a business education that has been trained in reviewing the books of a business) reviews the assets, liabilities, assets, debts, expenses, etc., of a business and determines its value. Depending on the nature of the business, it will be important to have a professional complete the valuation because the process can be incredibly complex. Having an accurate value of the business will allow both spouses to engage in meaningful discussions regarding the settlement of the divorce or at least give the spouses direction as to how to fairly divide the marital estate.
3. Consider a Prenuptial or Postnuptial Agreement
If you are not yet married, consider getting a prenuptial agreement that outlines how your business assets will be divided in the event of a divorce. In a prenuptial agreement, the more specific you can be, the better off you’ll be. For example, list individual bank account numbers (instead of just “Wells Fargo Bank Accounts”), individual assets (instead of just “All business assets and real property”), etc. Then, as stated above, make sure you keep those assets separate from your marital assets after marriage. If you are already married, you may consider getting a postnuptial agreement that achieves the same goal. Postnuptial agreements can be legally complex, so you’ll want to make sure you hire an attorney that has experience with these and knows the case law surrounding potential issues that can arise. These agreements can help protect your business interests and avoid costly and lengthy legal battles.
4. Hire a Divorce Attorney that has Experience with Business Interests
A skilled attorney that has had hands-on experience in dealing with businesses in a divorce can help you protect your interests. If your divorce attorney has experience in the business world, that’s even better; they should then be able to assist you in understanding your rights as a business owner (or a partner in a business) and ensuring that you’re taking necessary steps to protect your business from the legal complexities that can arise in the context of a divorce. Additionally, an experienced attorney will help you ensure that your business gets valued properly, or if necessary, ensure that the right business valuators get put in place.
5. Be Open to Negotiation and Compromise
In some cases, it may be in your best interest to negotiate with your spouse and reach a compromise. This can help you avoid a lengthy legal battle and can be beneficial for both parties involved. Keep in mind, different judges have different proclivities: some judges are more prone to dividing marital business interests right down the middle regardless of the consequences, and others may attempt to work out a solution that allows the business to stay intact. Regardless of who your assigned judge is, taking matters into your own hands gives you more control of the outcome and your own future. So, your attorney should be able to tell you what your risk is—if you have risk, be willing to acknowledge it and then work towards a compromise.
In conclusion, protecting your business during divorce in Utah is an essential part of any litigation strategy. By keeping your personal and business finances separate, getting a business valuation, considering a prenuptial or postnuptial agreement, hiring a skilled attorney, and being open to negotiation and compromise, you can protect your business interests and ensure that your business continues to thrive after your divorce.