5 Ways to Protect Your Business During a Divorce

By Carrie Smith on 1 September 2015 0 comments

Getting a divorce can be one of the most emotionally devastating times in your life. Combine this with running your own business and next thing you know, your life has become extremely stressful. I know, because I've been there.

If you're going through the a divorce, here are some important financial steps to take to protect yourself and your business.

1. Get Organized

The first step when dealing with a divorce as a business owner is to get organized and find a lawyer who can help you take the right steps.

Gather all your financial documents, business and bank statements, agreements, and other information that pertains to your business and marriage. Any debts and assets you and the business owns will have to be calculated and divided up. Examine all the bank accounts and documents, as you don't want to be out of the loop in a situation like this.

Depending on the state you live in, and whether or not you signed a prenup, you and your spouse could be forced to split the business profits — and everything else — 50/50. If you and your spouse work in the business together, the operating agreements should outline directions for each spouse to protect themselves during a divorce or other separation.

2. Fill In the Details

What assets or savings did you bring into the relationship? How much do you have personally invested into the business? What are the balances of your personal, joint, and business accounts, investments, credit cards, and loans?

Work with your spouse (or a lawyer if you need help mediating) to fill in all these details. Put the information on paper, or in a spreadsheet, so you're both on the same page. Ask your accountant for all the financial reports, profit and loss statements, and balance sheets for the business, too. Everything needs to be accounted for.

3. Protect Yourself

The next step involves dividing up the assets and agreeing on whether to sell the business, dissolve it, or keep it up and running. If you jointly own a home, the mortgage will have to be refinanced into your or your spouse's name, unless you both agree to sell it.

By the end of the divorce process you want all of your assets divided fairly. Leaving joint accounts after a divorce can lead to credit reporting inaccuracies and even fraud.

Take steps to protect yourself and your business during this process by separating all joint accounts, assets, and debts. Until a property is sold or refinanced into your name, you're still liable for the entire mortgage or rental payment — whether or not your spouse helps split the bill.

4. Keep a Paper Trail

Any conversations you have with your spouse need to be in writing. Save all your emails, notes, and text messages. This is especially important when it comes to figuring out the important details of how you'll handle the business together.

In the event that you and your ex can't discuss things in a calm fashion, you'll need written proof of what each other has agreed upon so you can move forward with the divorce. Keep a paper trail of all the bank accounts you've dissolved, assets you sell, debt settlements, loan refinances, and any other financial paperwork. You may need written proof of these transactions in the future.

5. Start Fresh

Continue protecting yourself as you move forward and rebuild your life. This means opening up new bank accounts in your name only, for both personal and business, and making a plan to get back on track.

Check your credit report using a secure site like annualcreditreport.com, to make sure everything is accurate. If you see any incorrect accounts, numbers, or names, reach out to the top three credit bureaus and get it corrected.

When my divorce was finalized I was left with over $14,000 of consumer debt that we accumulated during our marriage. I had to find a new job and start making a plan to pay it down. Our credit was also conjoined since we had shared accounts, and these took some time to separate. It was rough to say the least.

You don't have to lose your business just because you and your ex aren't on speaking terms. Work with a legal representative you trust and make sure everything's in writing.

Have you ever gone through a divorce as a business owner? What was your experience?

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