4 Things Any Woman Business Owner Needs To Know About Divorce
Divorce is a complicated life circumstance, and for women business owners, it is a complex one as well. Reducing the impact of life change and the responsibilities of managing a business takes planning and strategic thinking. How divorce impacts your finances, legal and work life can assist you during this time. Here are 4 things you need to know about divorce that every woman business owner needs to know.
Divorce is a complicated life circumstance, and for women business owners, it is a complex one as well. Reducing the impact of life change and the responsibilities of managing a business takes planning and strategic thinking. How divorce impacts your finances, legal and work life can assist you during this time. Here are 4 things you need to know about divorce that every woman business owner needs to know.
1. Your Company Could Be an Asset of the Couple.
A question that most of us are asked when getting a divorce is whether your business is part of your property or not. That is dependent on when the company was founded, its financing, and if your spouse helped in growth.
Key Points to Consider:
Premarital Assets: If you started your business before getting married, it can be separate property, although any value it gains during the marriage could be divided up.
).Pensions from Spouse: If your spouse contributed to the business (be it by being involved in the business directly or helping out at home) this might solidify their stake in some value.
Contracts: A prenup or postnup will bolster your business when it comes time to get divorced by making clear the division and ownership arrangements.
Action Steps:
Keep a book of accounts to establish the value of the company prior to and during the marriage.
Find a business and family law lawyer to learn how your state views business assets during a divorce.
2. It’s Likely You’ll Need To Do A Business Valuation.
Value of your business will need to be calculated to see where it belongs in the divorce agreement. It includes analyzing the company’s resources, liabilities, income, and prospects.
Types of Valuation:
Asset-Based Approach: Values the company’s assets less its liabilities.
Income Approach: Estimates the company’s income and estimates future income.
Market Based: Comparison of your business with companies recently sold.
Why It Matters:
It’s based on the valuation whether you’ll split your company or you’ll have to take over your spouse’s share.
Value dispute can derail a divorce, so be sure to hire a qualified valuation professional.
Pro-Answer: Be honest during the appraisal and work with experts who know your market so they can give you the right valuation.
3. How Divorce Can Affect Your Company’s Functions?
Apart from legal and financial, divorce can also prevent you from managing your business properly. Stress, debt, and lawsuits can eat away the time and energy you normally invest in your business.
Potential Challenges:
Financial Challenge: Settlements in divorces and legal proceedings might require you to use business cash, which can hurt cash flow.
Distractions: Divorce can affect working and decision-making capacity.
Reputational Dangers: Your divorce may influence client, employee, or investor trust if made public.
How to Mitigate Disruption:
Hand over tasks to trusted team members so the business is operating efficiently.
Keep a work-personal distance: Don’t discuss personal issues at work.
Borrow cash or get loans to cover the bills.
4. If You Plan Early It’s A Way to Secure Your Business.
Be proactive about planning to protect your business from the unknowns of divorce. It is possible to start earlier, even before you are married, and be well ahead of losing ownership of your company.
Protective Measures:
Prenuptial/Postnuptial Agreements: Make clear who gets what and how much in the event of divorce.
Separate Money: Don’t mix the personal and business money, in order to keep it separate.
Insurance: Look into key person insurance or similar to keep you covered in times of turbulence.
Long-Term Considerations:
Reconsider your business model; creating or incorporating a trust could be additional protection.
Be sure to keep detailed accounting books for all the money in order to have it open in court.
Post-Divorce Planning:
Delete or change ownership documents, bank accounts and contracts if you divorced someone.
Re-organize and build your business with the eyes of the future.
Many different scenarios women business owners must plan around with an expert. If you know the legal and financial risks, are ready for valuation, can keep disruption to a minimum, and do your best to safeguard your business, you can take on this traumatic time with calm feet. Gather legal, financial, and emotional resources by your side to get you through it, feeling ready to move on with your business and life.