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Protecting one's small business from property division

No one goes into a marriage in Clinton Township expecting that it is ever going to end. Statistics, however, seem to undermine the confidence of those who scoff at the potential of ever getting a divorce. Information shared by the Michigan Department of Health and Human Services shows that as recently as 2016, 28,916 couples sought divorce in the state. Yet even when faced with such statistics, many approaching marriage do not even want to consider a prenuptial agreement. Avoiding creating such an agreement can be damaging, especially for small business owners. 

Even in cases where one established their small business prior to getting married, any profits that the business makes during their marriage are considered to be marital assets. Thus, in absence of a prenuptial agreement protecting one's business interest, it is almost an inevitability that the non-business owning will profit off the business in some way in a divorce. 

There are methods one can follow to minimize that, however. According to the online publication Inc.com, these include: 

  • Using partnership or shareholder agreements to lock out a spouse: One can structure an agreement the provides investors or partners the right to buy out the shares of a divorcing partners and/or their spouse. 
  • Paying oneself a salary: Investing profits from a business back into a company gives one's ex-spouse leverage during property division to claim that marital assets are comingled with the business
  • Forfeit another marital asset in return for an ex-spouse's claim to the business: One might consider forfeiting their claim to the marital home or another marital asset on the condition that their ex-spouse give up any claims to their business

On can also set up a post-nuptial agreement that has the same validity in keeping assets separated as one created prior to a marriage.

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Lorrie J. Zahodnic

"I will hold you up until you can stand on your own two feet."

Lorrie J. Zahodnic, P.C. has provided skilled and compassionate legal guidance to Michiganders in family law matters for over 20 years.

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