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Protecting a business during divorce proceedings

On Behalf of | Sep 14, 2023 | Divorce

The two parties in a divorce might not have equal assets, and the distribution of assets can be subject to a court’s decision. Tennessee business owners may worry about how negotiations or court rulings will affect their companies. There can be some steps an entrepreneur may take to protect their business during divorce proceedings.

Divorce and business assets

Pre- nuptial and post-nuptial agreements can address concerns with one spouse’s claim to a business’s assets. A properly written and legally binding agreement may limit how many assets a spouse will receive during a divorce. The spouse must agree to the provisions and do so without any duress.

A buy-sell agreement might work in everyone’s favor if spouses divorce and questions arise about what happens with the business. These agreements might detail the business’s shares’ worth long before the divorce. The buy-sell agreement can specify the distribution of shares during a divorce. A business can remain stable when such an agreement is in place during the divorce proceedings. As with other contracts, these types of agreements must be legally binding under state law.

Further considerations during a divorce

A small business owner with multiple partners may face complexities during a divorce. Uncertainties arise regarding the financial situations of the remaining partners involved. Creating contracts and binding agreements that enable other partners to purchase shares can be helpful. Such agreements can prevent one spouse from being forced to take ownership of the business.

Establishing a trust is another possible option. A trust can reflect another example of pre-planning steps to protect a business during divorce proceedings. Tennessee state law establishes rules for using a trust under such circumstances.

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