William Marcus Wilkerson
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How to make your business divorce-proof

On Behalf of | Sep 27, 2023 | Family Law |

Business owners who get a divorce have a complicated set of problems to face. If you own a business in Texas and are about to tie the knot, here are some things you should consider.

Shareholder agreements, operating agreements and partnerships

If you choose a sole proprietorship as the business structure for your company, it might lead to issues later down the line. It doesn’t matter whether your spouse was in the office every day or was a stay-at-home parent. If you get a divorce, they’ll get their share of your business. This can sometimes be as much as half of the company, so you’ll want to be wary of this misstep.

On the other hand, a shareholder agreement, operating agreement or partnership is considered a wise idea. These options offer ways to safeguard your business. In each of these arrangements, your interests are protected should divorce happen.

With these types of business setups, shares can’t be transferred unless approved by other shareholders or partners. This makes it so you’re more likely to stay in control.

Prenups, postnups and buy-sell agreements

A prenuptial agreement might not sound like the most romantic thing, but it is the reality for many couples because it makes sense and is the responsible choice. If you own a business, it’s important to make these decisions ahead of time. The prenup allows you to deem part of the business as separate property versus marital property if you ever get divorced.

There’s the postnuptial agreement as well. This bears some similarities to the prenup, in that it establishes the parts of the business that each spouse will own in the event of a high-asset divorce.

A buy-sell agreement is also advisable to have, even if you do go through with the pre-nuptial agreement. With this type of agreement, the formula to establish the business value is agreed upon as early as possible. The agreement offers protection from any divorcing partner who tries to force their way into the business. Without this agreement in place, the courts let the former spouse join as a partner, and the business can be doomed.