Why is it important to pre-plan to protect your business during a divorce? One of the most crucial areas of focus for business owners and licensed professionals considering a divorce is the nature of that asset (marital property, separate property or commingled), valuation and ultimately how any marital interest in the business will affect the company or practice after the divorce. Here in Kentucky, all assets and debts obtained by either spouse after the date of the marriage and before the date of separation, as well as property owned by either spouse that was supported in any way through marital labor or funds, must be considered during marital property division. Marital property is to be equitably divided between the parties of a divorce in Kentucky.
How does the ownership of a business interest impact the owner as they prepare for a divorce? If the company or practice was started before the wedding, and no marital funds, credit cards, or assets have been contributed to support that business, the asset will most likely be determined to be the separate property of the owner, and they will retain full ownership of that asset during and after the divorce.
However, if the company was acquired or a licensed professional started the practice or obtained an interest in an existing entity during the marriage, that business asset is most likely going to be considered to be “marital” property, subject to division during the property division process of the divorce.
If you are a business owner who is contemplating a divorce or know one might be possible, it is important to pre-plan to protect your business during a divorce. Let’s make it clear: it is not legal or ethical to manipulate business income, salary, cash flow, or any other aspect of your business operations in an attempt to manipulate the valuation of the company during the divorce. However, there are prudent steps that can be taken to protect those interests and increase the likelihood of maintaining full control of that asset during and after the divorce. The family law and divorce attorneys at Dodd and Dodd have decades of experience in these complex divorce matters. We can help answer your questions and help you make preparations to protect all you have worked so hard to build.
For example, you might want to consider a post-nuptial agreement. A post-nuptial agreement is a contract between spouses that is entered into after the date of the marriage and before the date of any separation. This post-nuptial contract could establish important protections regarding ownership, including how the valuation of the asset will be conducted as well as potential remedies to offset any potential marital interest your spouse may have if and when a divorce occurs.
The agreement could establish that the non-owner’s portion of the marital property interest in that asset would be offset by equity in the family home, investment or retirement accounts, or some other asset or group of assets. Your business (or you personally) may be able to pursue a loan or line of credit that could be accessed if it is necessary to offset your spouse’s marital portion of the company or practice during property division.
There are many reasons to pre-plan to protect your business during a divorce. There will also be extensive financial and tax-related issues to manage. Dodd & Dodd has decades of experience with divorce, business and tax matters. All of these areas of expertise will come into play for the business owner who is considering or approaching a divorce in Louisville or throughout Kentucky. These are complex financial and legal issues, and you will need the experienced divorce, business, tax, and family law attorneys at Dodd & Dodd.
We invite you to review the strong recommendations of our former clients and the legal industry and contact Dodd & Dodd or call 502-584-1108 to schedule an appointment with one of our attorneys.
