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How businesses are impacted by divorces

On Behalf of | Sep 22, 2022 | Blog, Divorce, Property Division

A divorce can be a complicated affair regardless of your net worth or whether it is settled inside or outside of a New Jersey courtroom. However, if you own a business, ending your marriage may result in chaos for workers, investors and others who are associated with it.

You might lose control

Depending on how your company is structured, you may be at risk of losing your role as majority owner after the divorce is finalized. This may be true if a judge determines that the company is a joint asset that is subject to state property division rules. In such a scenario, your former spouse may be granted an equity stake that effectively makes you a minority shareholder. It’s also possible that you’ll have to sell your shares to pay your spouse an amount equal to a portion of the company’s current value.

How to protect yourself

It may be possible to prevent the sale or transfer of your company by putting it into a trust well before divorce proceedings begin. Doing so generally means that the company is considered outside of the marital estate, which means that it is effectively separate property. You may also declare that your company is separate property as part of a prenuptial or postnuptial agreement.

Stay focused

A divorce may make it harder to concentrate on running your company. Therefore, it may be best to hand over control of the business to a trusted partner until you are able to put the company first again. Doing so enables you to focus on negotiating a favorable settlement while also instilling confidence that your organization has a clear leader during a difficult period in your life.

Ideally, you will start planning for a divorce long before you begin official proceedings. Doing so will likely give you time to collect documents or take other steps to help you obtain a quality outcome in your case. It may also ensure that your company remains a viable entity regardless of whether you remain its leader after your marriage ends.