Divorce can be an emotional roller coaster and a complex affair, especially for entrepreneurs who have created businesses right along with their personal lives. While divorce often appears unavoidable at times, it brings along a litany of legal and financial challenges that can have quite a bearing on the future of a business.
When filing for a divorce, a business owner typically faces a complex mix of legal issues requiring detailed planning and professional assistance. With the stakes high, entrepreneurs should understand how the process is going to affect their business ownership, operations, and assets, and prepare ahead of time.
Valuation of Business Assets
One of the toughest parts of a divorce for business owners is valuing the business. In Connecticut, courts use different methods of valuation including fair market value or a professional business appraisal. If not done right, this could result in an unfair distribution of assets. To avoid any problems, hire a business valuation expert or an experienced forensic accountant, and also keep detailed records of the business’ financials to help with the valuation.
If you’re unsure how to approach the valuation of the business in your divorce, it would be best to consult a firm specializing in business-related divorces to get tailored advice on how best to protect your business interest. Learn more here to stay on top of things during your divorce proceedings.
The Division of Business Ownership
In divorce, there is often a question of whether both partners have an interest in the business. When one of the spouses owns the business, the other spouse may become entitled to a share in the value of the business. These situations can also lead to disputes over the distribution of ownership or even the sale of the business.
Work with an expert to document your business ownership through a formal or prenuptial agreement. If there is already a divorce in progress, negotiate a buyout or buy-sell agreement so that you don’t have to sell the business.
Impact on Business and Personal Assets
Assets acquired during the marriage in Connecticut are generally considered marital property. This can include a spouse’s interest in the business. However, there should be a distinction between personal and business assets so that the business assets do not get divided unfairly.
All business-related expenses, properties, or assets should have separate accounts. Consult a family law attorney to prove that the business was established as separate property if it predated marriage or if it remained separate during the marriage.
Protection of Intellectual Property and Trade Secrets
Intellectual property, including patents, trademarks, and trade secrets, is often a business’s most valuable asset. However, like any other asset, it can be swept up in the chaos of a divorce and exposed. Confidential information can be shared and rights of ownership contested. Protection is essential.
All intellectual property rights should be addressed in a settlement agreement and property deeds. In addition, all contractors, employees, and partners should be required to sign non-disclosure agreements. An attorney can help you protect your most valuable business assets.
Endnote
Entrepreneurs facing divorce in Connecticut often face various challenges that affect both their personal and business assets. Entrepreneurs who take proactive measures, including getting advice from expert financial and legal consultants, and also keep up-to-date business records can prepare to meet such challenges more effectively.
