The process of ending a marriage becomes even more complicated when one or both spouses own a small business. If you own a business with your spouse, you are likely concerned about its fate after the divorce. Will you continue to work with your ex-partner? What will happen to your livelihood?
Fortunately, you can take steps to protect your business and move forward successfully with your company after a divorce.
Property division in Kentucky
Kentucky is a no-fault divorce state with equitable property division of assets either partner acquired after the marriage. If you have not established other arrangements with a prenuptial agreement or business bylaws, your spouse receives a share of the business even if he or she was not involved in its operation.
The judge can decide to split property unevenly between divorcing spouses. This decision depends on the earning potential of each partner, how each spouse contributed to the property, the economic standing of each partner and other factors.
Steps to protect your small business
Even if your marriage is healthy, you can take steps to shield your business from the effects of a divorce. Small business owners should consider the following:
- Create a prenuptial or postnuptial agreement that establishes a business valuation method in the event of divorce, whether your spouse receives a portion of the business assets if you split and how that allowance will influence factors such as personal property division and spousal support.
- Add a divorce clause to your business bylaws. Like a prenuptial agreement, this is a legally binding contract that will guide the valuation and division of your business in a divorce.
- Have your business valued before seeking a divorce. Getting an expert appraisal will help you and your spouse come to an agreement that serves the interests of both parties.
Legal documentation is the best way to protect your business from the financial impact of a divorce. In the absence of a contract stating otherwise, Kentucky typically considers small businesses marital assets and may split them 50/50 between divorcing partners.