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Protecting a business without a prenuptial agreement

For those in Florida who own or who are planning to start a business, it is important to understand how that asset would be treated in the event of a divorce. The best way to protect business interests is to draft a comprehensive prenuptial agreement. Another good option is to create a postnuptial agreement after the marriage has begun. However, for those who were unable to secure either of these sources of protection, there are still steps that can be taken to minimize the loss that would occur if the marriage should end in divorce.

The best place to begin is with a full evaluation of the value of a business at the time of marriage. There are professional appraisers who specialize in this type of work and who can provide a written report of value along with the comparable properties and other data that support that number. Next, maintaining good financial practices and keeping detailed records is important. Business owners should be able to clearly document that their business finances are kept separate from their personal finances.

It is also essential that a business owner pay him or herself a salary. This documents the amount that is set aside for compensation. It can also help to limit a spouse's argument that there are funds within the business that should be paid to him or her. Limiting distributions from the business and avoiding using business funds to pay for personal expenses can also make things clearer if the records were ever used in a court action.

As noted in the beginning, having a prenuptial agreement in place is the best way to protect a business during divorce. However, in cases where a prenup was not secured and where a postnuptial agreement is not possible, the steps listed here can help protect a Florida business from loss during a divorce. It is also important to secure the services of a divorce attorney who is experienced in handling business assets during property division, which can help limit losses.

Source: The Huffington Post, "Essential Steps To Divorce-Proof Your Business", Lisa Helfend Meyer, June 29, 2016

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