As a self-employed person, it seems that your business is always under threat. There are potential lawsuits, increased competition, and customers with higher expectations.
You protect yourself by having an LLC and you work hard to beat the competition and meet customers growing demands.
The biggest threat to your business though could be the person you married. Statistics aren’t kept on the divorce rate for entrepreneurs, but it’s widely assumed that it’s higher than for non-entrepreneurial couples.
That’s why protecting assets from divorce is critical. It doesn’t matter if your marriage is perfect right now or going through a rocky period.
You never know what the future can bring, and you want to be sure that you’re prepared for any eventuality.
Read on to find out the top 7 tips for self-employed workers to protect themselves in a divorce.
1. Have an Agreement in Place
Depending on when you started the business, you need to have some kind of contract in place whether that’s a prenup or postnuptial agreement.
This will be a contract that you and your spouse enter to which outlines what part of the business can be considered marital property and what can be separate from the marriage.
You may list all assets within the business and have your spouse waive their right to them in the agreement, too.
This is not only to protect yourself but your spouse as well. Let’s say that you started a business in a lot of debt, and something happened to you. They could be on the hook for the debt that you accumulated.
That’s not a great way to treat yourself, but your spouse too.
2. Know the Worst-Case Scenario
Let’s put it this way, it couldn’t get any worse than being in Jeff Bezos’ situation. The guy is publicly being blackmailed by the National Enquirer and in the process of getting a divorce that could cost billions.
In a worst-case scenario, you could have your spouse as a business partner. They could become vengeful and impact the relationships with your clients and customers. That type of behavior would eventually bring down your business.
You want to know what the potential worst-case scenario to motivate you to take action in protecting assets from divorce.
3. Form a Corporation
As a self-employed person, you could be operating as a sole proprietor. This is a mistake. You need to form a corporation to protect your business not just from divorce, but from any legal claims that someone could make against you.
Depending on your income, or the type of business you have, you can form an S-Corp or LLC. An LLC is a good option for sole proprietors and freelancers.
What this does is create an entity that is separate from you. It can have business assets, like inventory, equipment, or a vehicle.
You need to keep the finances separate from your marital assets. Even paying for a bill using a joint bank account could cause the business to be seen as marital property.
4. Hire a Good Team
You don’t have to be on the brink of divorce to protect your business.
Business law and divorce law are incredibly complex to figure out on your own. You’ll want to work with a business attorney to make sure that you have all of the necessary documentation in place to review your legal structure and a divorce attorney can review what
If you’re filing for divorce, you want to have an attorney in place and take a few added steps to protect yourself.
Another thing you want to do is have a good accountant go over all over the assets of your business and personal lives and figure out what your net worth is.
5. Pay Yourself Well
Business owners always pay themselves last. That’s a noble thing to do for your business, but it can cost your business in a divorce.
Your spouse’s attorney could argue that all of the money went into the business and not into the household. They’ll claim that they didn’t get a benefit out of it and could claim a percentage.
6. Keep Your Business Out of Your Marriage
In a lot of cases, entrepreneurs are married to their businesses. That’s not a bad thing, but in times of need, they will rely on their spouses for administrative tasks like bookkeeping or negotiating contracts with vendors.
Even if you ask your spouse for advice, just like any couple would go to their spouse, it could leave you vulnerable.
It technically could make your spouse a part of the business. In that case, your spouse would be entitled a percentage of the business. The more they were involved, the greater the percentage they could claim.
Let’s say you built an incredible brand and had a logo done for your business. You asked your spouse for advice on the logo. That brand is now well-known around town. They could claim a percentage of your business for something like that. It doesn’t mean that they could get it, but they could try to claim it.
7. Sell the Business
You could go with the nuclear option and sell your business. If it’s likely that a judge or settlement agreement will decide that your spouse can get a percentage of the business, you can always sell the business and give your spouse a percentage.
It’s not an ideal situation, but it avoids the worst-case scenario.
Protecting Assets from Divorce is Necessary
You could have the perfect marriage that lasts over 50 years. You could have a quickie marriage that lasts a little longer than Kim Kardashian’s first marriage.
No matter where you’re at in your relationship with your spouse, protecting assets from divorce now can save your business later.
With the tips outlined in this article, you’ll know that your business is safe and secure. You don’t need to fear that you’ll lose it in a divorce.
That means that you can focus on growing your business for success. You’ll want to read this article about ways you can make your company stand out in a crowded market place.