Business owners in British Columbia who have marital problems may be concerned about the effect a divorce would have on their commercial ventures. In many marriages, family businesses are the most valuable personal assets of both spouses. To prevent having to sell the company and split the profits, here are three ways to protect business assets in a divorce.
If the company exists before the marriage, a prenuptial agreement can specify what will happen to the business if the couple should file for a divorce. With proper legal guidance, the couple can draft an ironclad marriage agreement. It must be in writing, with witnesses to confirm that it was executed voluntarily. Full disclosure of each party’s assets is required, and the final document must be conscionable.
If the couples did not address this issue in a marriage agreement, a buy-sell contract could prevent the disintegration of the company in a divorce. Co-owners of a business sign such an agreement that determines what will happen with an owner’s share if he or she dies or divorces. A buy-out agreement typically states that that person’s interests would be sold to other company owners at a predetermined method of valuation.
A third strategy is to use a trust to protect business assets. This is a practical way if it is a family business. For example, a parent can put the shares in a trust for a child, and a spouse would not be able to touch the business assets if the couple decides to divorce. There are other options available, but the most appropriate step might be to discuss the alternatives with an experienced British Columbia divorce lawyer.
Source: marketwatch.com, “How to protect your family business during a divorce“, Daniel Thompson, Accessed on April 21, 2017