Sure, no-one wants it to happen, but the stats say it will. We show you how to protect your business from a divorce proceeding.

Many people enter marriages with a thought for living happily ever after with their partners, but more often than not, they end up disagreeing over assets in their divorce settlements. In fact, statistics show that almost six in every first marriage end in divorce, whereas the number is higher (about 70%) for second and third marriages. That means that as blissful as marriages are, it is good to ensure you have a backup plan to protect your interests from your partner in case you might split up years down the line. Whether you own an entire enterprise or a small stake in a company, here are a few ways you can use to protect your shares from your spouse before and during divorce proceedings.

Draw up a Prenup

A prenuptial agreement or ‘prenup’ is a legally enforceable contract between two unmarried parties with the intention of marrying, one that stipulates the property rights of each of those parties and the expectations each has of the other in case of a divorce. A prenup that meets all the legal and recommended requirements supersedes all other documents in a court. Therefore, outlining that you expect to solely own your interest in a company even after marriage in your prenup could save you a lot of time and effort in the future.

For a prenup to be taken seriously, it needs to be conscionably written with the help of your lawyer as well as your spouse’s and voluntarily signed by both you and your partner before witnesses. Ensure you disclose all your assets in the agreement and sign it at the latest weeks before the wedding to make it binding.

Separate your Properties and Finances

Properties owned during a marriage can either be separate or marital. Separate properties are those you solely owned prior to marriage whereas the marital ones are owned by the two parties, or were acquired over the course of the marriage. Ensuring your shares are listed as separate in a prenup or postnuptial agreement protects your interest in case your marriage dissolves. The only condition is that you do not mix the shares with your partner’s during the marriage (by gifting them, depositing returns from it into a joint account etc.).

Additionally, keep your business and personal finances separate. Do not use money from the household to purchase equipment or other investments for the business because that would strengthen your spouse’s claim to your shares.

Get a Fair Valuation

You can keep your former partner from getting a larger stake in a business you own by getting a fair valuation. Contracting a professional valuation company could mean the difference between you paying off your spouse based on the current market value for your firm and based on projections, which would entitle your partner to more money or shares.

Substitute Assets

If you don’t want to end up as business partners with a former spouse, substituting the shares you owe with other assets might be an option for you. Divorce settlements require that assets from both parties be added, the values arrived at and then divided. You can save your shares by offering your spouse a different asset during the proceedings.
For more information, please feel free to get in touch with us.

Mathieu Paul
Director – Business Improvement
P: +618 6315 2700
E: enquiries@wabusinessvaluations.com.au

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The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

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