How to Protect Your Small Business in Divorce
Next to parenting time and access, the thing that causes most couples the most stress is the division of assets. This can be particularly challenging when the couple owns a small business, particularly if one spouse owned it before the marriage. Our Nashville divorce attorneys have helped enough Tennessee business owners to know that without a clear plan, you could end up losing what you worked your entire life to build. There are a few things to consider and discuss with your attorney if you wish to protect your business during your divorce.
- Prevention is ideal. Signing a prenuptial agreement before marriage (or a post-nuptial agreement after you are married) is an ideal way to protect your business by keeping it separate. If you do not like the idea of a pre-nup, a buy-sell agreement with your spouse is another option. It will include an agreement about how ownership of the business will be addressed if you ever divorce.
- Get the business valued by a forensic accountant. Ideally you would determine the value of the business prior to the divorce being filed. The accountant will review your financials and determine the value of the company, and how much, if any, your goodwill contributes to the value of the business. We work with these types of financial experts on behalf of our clients, and we understand the importance of the correct valuation for your business.
- Keep home and business finances separate. This is crucial. Any comingling of accounts could lead to them becoming martial property, which is divisible under the law in Tennessee. Make sure that you draw a salary from the business and that your family finances are kept separate and apart from your business finances.
- Consult with your CPA early. Get all the appropriate documentation together, because we will need to see it, too. Make sure to listen and document any advice or potential pitfalls your CPA tells you about so you are fully prepared.
You have options to keep your business safe
Tennessee law requires the equitable division of assets. Are you willing to give up some assets to keep full control of your company? If so, then you and your soon-to-be-ex may be able to negotiate a plan more easily. You may need sell a portion of the business to raise the cash to buy your spouse’s interest. The most important thing is to remain transparent about the process. Anything that you do with even a hint of shadiness will eventually come to light and tarnish your position, so listen to the advice from your lawyer, your CPA and your financial advisors, and be prepared; you might need to decide if the company is worth the sacrifices you might have to make to keep it in the divorce.
Are you considering a divorce in your future? If you are a small business owner in Tennessee and you are concerned about how a divorce might adversely affect your company, it is time for a consultation with the experienced Nashville divorce attorneys at the Miller Upshaw Family Law, PLLC. We can listen to your story and advise you as to the course of action that works best in your situation. Please give us a call at 615-391-4200 or fill out our contact form to discuss your case and we will offer legal guidance.
Karla C. Miller has devoted her entire career to the practice of family law in Tennessee. She attended Auburn University and Nashville School of Law, and upon graduation in 1996, she opened her own law firm and has been assisting families throughout Tennessee since then. Learn more about Karla C. Miller here.