Running a real estate business is hard enough on its own. Layering a divorce on top of things only serves to complicate your responsibilities and loyalties. If you're facing a divorce situation, you must proceed very tactfully.
Ways to Protect Your Business Before/During a Marriage
Ideally, you should protect your real estate business before you get married (or at least while your marriage is in a healthy place). Here are the ideal ways to do this:
Priority #1: Sign a Prenuptial Agreement. You want this prenup to designate your business as separate property and to detach it from your marital assets. It's also important that the prenup is structured in a way that the appreciation or increase in value of the business is protected.
Priority #2: Sign a Postnuptial Agreement. If you were unable to sign a prenup, or if you start a business during your marriage, the next best option is to sign a postnuptial agreement. This is typically much harder to do (unless your spouse is totally laid back and has plenty of their own assets and income).
Priority #3: Structure the Business Appropriately. If forming a new business during your marriage, meet with a business attorney to help you craft an agreement that has provisions explicitly stating what happens to the business if one of the owners' divorces. Note: This will give the business protection, though it does little to protect your interest in the business.
Ways to Protect Your Business During a Divorce
We're going to assume you're reading this article because you have not preemptively protected your business and are now going through a divorce in which the business is at stake. In this case, there are several things you can do.
1. Don't Be Irresponsible
When business owners feel threatened by divorce, there's often a tendency to act rashly, but this usually comes back to bite them. For example, if your spouse is currently an employee of the company, you might figure it's best to let them go. But that's a big mistake.
"You can't just fire your spouse if they're working for the business," attorney Rowdy G. Williams notes. "You must be extremely mindful of how you treat them during the divorce process. While difficult to do, it's best to keep your work and personal relationships totally separate."
You also have to avoid sabotaging the business in an attempt to spite your spouse or protect assets. All books, records, and decisions you make during your divorce will be carefully analyzed by attorneys on both sides (as well as the divorce court). Poor or unethical decisions will come back to haunt you.
2. Hire an Accountant
If you don't already have one working for your business, now is the perfect time to hire an accountant. Your accountant will help you get your financial house in order and ensure everything is done by the book. Work with your accountant to gather and organize receipts, invoices, tax information, bank account details, etc.
3. Hire a Lawyer
You should hire a lawyer regardless of the circumstances of your divorce. However, it's especially important to get one involved if there's interest in a business at stake. Work with a good attorney who has experience handling divorces similar to yours. (You want to make sure they aren't cutting their teeth at your expense.)
4. Focus on the Business
At the end of the day, you need to focus on the business and continue to do what's best for the company. This is especially true if you have regular customers and/or employees. There are other people depending on you. You owe it to them to continue living up to your end of these agreements.
The best thing you can do is continue to grow the business and accomplish your goals. At the end of the day, this will put you and the business in an ideal position. Let's just put it this way: It's better to have a smaller piece of a successful business than a larger piece of an unsuccessful business.
Keep Your Business Safe
Divorce is never desirable or convenient. And it becomes even more complex when there's a business and other related assets involved. Thankfully, there are things you can do to put yourself in a good position. Use this article as a guide moving forward.