Over 33 million small businesses operate in the United States. Whether your business is a passion project or your sole source of income, you can face significant financial challenges if this income is threatened during a divorce.
The divorce process can create unique challenges for business owners in Maryland. Marital property is divided fairly and equitably in the state, including businesses and their assets. While the court and your spouse may view the court’s division as fair, you may have a different opinion if your business is financially impacted during the divorce.
Protecting your business in a divorce means safeguarding it from the court’s division of marital assets. Doing this is easier the earlier you begin.
Strategies That Can Protect Your Business
The best time to plan how to protect your business from the effects of a divorce is before you even get married. By creating an enforceable prenuptial agreement, you and your spouse can agree to treat your business and its value as separate property and not part of the marital asset.
But a postnuptial agreement can be just as effective if your business did not begin to take off until after you were married. In both cases, you will need to:
- Give your partner an accurate picture of your business and finances
- Put your agreement in writing and ensure both of you sign it
- Allow your partner to review the agreement and discuss it with a lawyer
- Make the agreement in contemplation of your impending marriage, or after you have been lawfully married
- Avoid creating an agreement that severely disadvantages the other person
However, even if you did not create a prenuptial or postnuptial agreement and are now facing divorce, there are still ways you can protect your business. These methods include:
Avoid Involving Your Spouse in Your Business
In the absence of a premarital or post-nuptial agreement, you should consider keeping your spouse at arm’s length from your business if you intend to keep it in the event of a divorce. The more involved your spouse is in the business’s operations and its support, the more difficult it will be to keep them out of your business following a divorce.
Challenge the Property Classification of the Business
The court’s property division orders only extend to marital property, not separate property. Thus, one of the first strategies you can employ to protect your business and its assets is to argue that your business should not be considered marital property.
If successful, the court will not consider your business’s value when dividing the marital estate, and your business will be left alone. An argument that your business is not marital property is more likely to be successful if you started the business before the marriage and never used marital assets to support the business.
Conversely, the more involvement your spouse had in the growth and operation of the business, or the more marital property that was used to get the business up and running, the more likely it will be that the court will find your business is a marital asset.
Offer Other Assets in Exchange for the Business
If the business is marital property and subject to division, your next strategy for protecting your business could be to attempt to negotiate a property settlement agreement.
Courts will often adopt such agreements if the parties in a divorce can agree on how their property should be divided, as long as each party treats the other fairly during the process.
You or your lawyer could offer the other party additional assets, spousal support, or some other concession in exchange for your spouse not claiming any interest in the business. For example, you could offer your spouse alimony for a specific period in exchange for your spouse allowing you to claim your business.
Contact an Experienced Maryland Divorce Lawyer
Perhaps the most crucial step in protecting your small business during a divorce is reaching out to a seasoned divorce lawyer. A lawyer has the legal knowledge necessary to anticipate any challenges you may encounter during the divorce process.
At Blattner Family Law Group, our skilled team can evaluate your situation and determine the best strategies for protecting your business, whether you are considering marriage, already married, or facing divorce.
We proudly serve clients throughout Towson and the surrounding area. To learn more about how you can safeguard your future, contact Blattner Family Law Group to schedule a consultation today.