Many people start their own businesses to support themselves and their families. However, if they decide to get a divorce in an equitable distribution state like Georgia, that business is may be classified as a marital asset and therefore may be divided ‘fairly and equitably’ between them and their spouse.
It can be hard to imagine your ex getting a part of the business you worked so hard to build. Fortunately, there are a few ways to protect your business from divorce.
Designate your business as ‘separate property’ in a prenup or postnup
Only marital assets are divided between spouses in an equitable division divorce. Separate property, or property belonging to just one spouse, will go to the spouse it belongs to in the divorce. Therefore, if you specify that your business (and its increase in value) is separate property in your prenuptial or postnuptial agreement, you can protect it from the property division process during your divorce.
Do not use marital funds toward business
Even businesses formed before the marriage can be considered marital property, particularly if use marital funds are used to contribute to the business. Keeping martial funds separate from the business will make it more likely that the courts will classify the business as separate property, protecting it from division in a divorce. Also, make sure to pay yourself a legitimate salary and prevent your spouse from getting involved in the business as much as possible.
Form a trust
By placing your business in a trust, you are giving up your ownership of the business and instead allowing the trust to hold onto your business assets for your beneficiaries. The benefit of doing this is that business assets in a trust are likely not marital property and therefore will not be divided during your divorce.
If you are already going through the divorce process, you still have a few options for protecting your share of the business. Discuss these options with a family law attorney in your area.