When we’re in love, we plan our lives together with that person. We share our joys, our sorrows, and even our material possessions. As we grow deeper into the relationship, we form a special bond -marriage. This partnership promises to go through the good and tough times together.
Marriage brings significant changes to your business in many ways. Particularly, it has a legal impact on your ownership and your company’s interest. As you step into a new chapter in your life, the last thing you want to worry about is protecting your business. So, it never hurts to take some precautions beforehand.
Separate and Marital Properties
As soon as you marry, any property you obtain gains marital or joint ownership. The law considers these assets co-owned. So, both of you are entitled to any shares that come with it. For example, starting a business during your marriage. When you use funds from your joint bank account as your capital, it becomes marital property.
In general, separate property refers to those assets you have before your marriage. These include inheritances or gifts and any property that you and your spouse declare to be independent. But, you can turn these properties into a shared asset. That is if you decide to add it to your marital properties.
Business Value Appreciation
After marriage, your business might no longer be an independent entity. Companies that generate active income during marriage increase their worth. In that case, the law considers these assets as marital property. It means your spouse is eligible for a share of any value appreciation of your business.
Protecting Your Business
Before changing your legal status from single to married, you should take precautions to protect your business. Here are some ways that you can do so:
Agreement or Contract
A contract is a reliable way to specify a company’s management and ownership structure. It is common for couples to enter into this agreement before tying the knot. In this case, there are two types:
It is a formal document that ensures your business remains a separate entity. It includes all your assets and companies, which both parties sign.
This contract is similar to the prenuptial document. What makes it different is the date it takes place. This type of agreement concludes after the registration of the marriage.
These agreements terminate specific areas in the marriage contract, particularly about marital properties. This way, it can prevent any unnecessary issues in case of separation.
If there is no prenuptial or postnuptial agreement, spouses can still protect their assets. You can take non-contract actions such as the following:
You can declare that you are the sole owner of your company. To do this, you must make sure that your business’ organizational documents explicitly say you are in control of it.
Personal Capital Investment
Keep a thorough record of the business’s sources of funding. This document establishes that you use your budget as capital to run the company.
Division of Expenses
You need to separate personal from corporate expenses. Disorganization in the couple’s finances might lead to a misunderstanding during litigation. It’s also important to keep detailed records of all cash transactions within your organization.
Dividing a Business After Separation
Assuming you didn’t make any business arrangements with your spouse. In that case, one of the following ways of dividing a private firm might be acceptable for you.
When it comes to resolving separation disputes, divorce mediation should be the first step. Mediators act as facilitators, helping you and your spouse reach a mutually beneficial agreement. This approach focuses on cooperation in the most reasonable way. Thus, resulting in a settlement that is more satisfactory for both parties.
The easiest method of resolving business separation issues is for one spouse to purchase the other spouse’s portion. This process does not involve any trials and can result in mutual benefits. But, a court order might be necessary if both spouses insist on running the business.
Selling the Business
For couples who can’t afford a company buyout, selling their firm and splitting the proceeds is the second-best alternative. Yet, there is a possibility that a couple will disagree with the selling price. If that’s the case, the parties should consider who will manage the company until it finds its buyer.
Preparing For Marriage
Nobody gets married expecting their relationship to end. Although the idea seems impossible, many couples still value safeguarding their assets.
We can’t always predict what will happen in the future. Having a plan in place and protecting your business has no negative consequences. While it seems unnecessary, it’s one way to maintain control over your company and your financial future.