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Does divorce threaten your small business's future?

Divorce is rarely simple or convenient, but for small business owners the process may wreak havoc on their professional lives as well. Small businesses usually qualify as property that a couple must divide during divorce, which may make it difficult or impossible to keep the business intact and the marriage.

If you own a small business and face divorce, you must consider your options very carefully. You may still have some opportunities to protect your business from property division, if you make it a priority to keep the business safe, but only if you act quickly. No matter where you are in the divorce process, a strong legal strategy is essential to protecting your rights and defending your priorities as you end one chapter of life and head into the next.

Does the business qualify as marital property at all?

Not all small businesses qualify as marital property that you must divide with your spouse. If you and your spouse have a prenuptial agreement that sets the business apart as separate property, then you have a strong basis to keep the business off the negotiation table, depending on the strength of the prenuptial agreement and whether your spouse wishes to challenge it.

Similarly, if you owned the business prior to your marriage or if your spouse had little or no involvement in the business, you may have grounds to claim that they made no real contribution to its success, which weakens their claim to its value. In broad strokes, the greater divide you can put between your spouse and your business, the better.

Negotiating to save the business

If your spouse has a firm claim on some portion of the business's value, then you may need to negotiate a settlement with them to keep the business intact. In these instances, it is usually wise to have the business undergo a professional valuation, which determines the actual worth of the business so that your spouse does not overestimate its worth.

If you have sufficient assets in other areas, you may have room to give your spouse these in exchange for their claim on the business. However, some business owners have the majority of their assets tied up in the business itself, and must work out some sort of regular payment to the other spouse to pay off the settlement.

However you choose to navigate divorce, make sure that you have a clear plan to place you on your feet on the other side. For many business owners, keeping the business together is the highest priority, because they recognize that the business is the strongest tool they have to use in post-divorce recovery. Make sure that you clearly understand your priorities and legal tools you have available as you enter into this difficult season, to keep you firmly grounded and keep your rights protected until you reach the other side.

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Robert Schembs
22 E. Washington Street
Suite 610
Indianapolis, IN 46204

Phone: 317-643-6266
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