As if divorce is not stressful enough, you are also trying to run a business during this highly emotional and uncertain time. Additionally, the business itself may be on the line. It is not uncommon for entrepreneurs to lose their companies to asset division during a divorce.
If you have a prenuptial agreement or an operating agreement that includes your spouse, your business may have the protection of these legal documents. However, this is not a given. Even a prenuptial agreement may not exempt your business from asset division if your spouse participated in the running or financing of the company during your marriage.
Get ready for the fight
Asset division in Colorado is equitable, which means the court will divide your property according to what seems fair, not necessarily an equal split. Therefore, even if you were not able to protect your business from inclusion in marital assets, you may have a chance to prepare so that you can negotiate to keep your business and protect its profits. To begin with, you can consider these steps:
- Prepare for the valuation of your business by gathering and organizing all documentation, including bank statements, loan agreements and records of the business’ assets.
- Consult an accountant for help with compiling a profit and loss spreadsheet.
- Calculate how much you personally invested in the company.
- Inventory any assets you brought to the marriage.
- Check your credit report to ensure you have a complete picture of your debt situation.
- Pay off as many joint debts as you can, and close joint accounts and credit cards.
- Give yourself a fresh start by opening bank accounts and lines of credit in your name.
- Keep a log of any communication with your spouse by asking for agreements in writing, by email or in text messages.
- Decide whether you want to trade assets for the business or dissolve the company to split the profits with your spouse.
Of course, for the most protection, you will also need to understand Colorado asset division laws and learn how they relate to your situation. Speaking with a lawyer who has skill and experience with complex divorces, especially those that involve business ownership, can be a decided advantage over handling the divorce on your own. An attorney will have the knowledge and resources to help you meet your goals and work to keep your business.