Divorce Tips for Entrepreneurs


If you've worked hard to build your own business, protecting this asset should be your top priority in a divorce. Although California's community property laws often give spouses a legal claim to a business, there are steps you can take to ensure your business remains under your control.

Family law attorneys, particularly in California and other community property states, generally recommend that a prenuptial agreement that clearly identifies the business as separate property be used to protect the entrepreneur's assets. If you're already married, a postnuptial agreement can be used to gain the same benefits. However, both agreements must be entered into voluntarily with a full disclosure of assets and liabilities as well as separate legal representation for both parties.

If your spouse doesn't feel comfortable with a prenuptial or postnuptial agreement, you can use a domestic asset protection trust (DAPT) to transfer ownership of your business into a trust. You do not need your spouse's approval to set up a DAPT and having a trust as the legal owner of your company mitigates the possibility of a marital claim to ownership in the event of a divorce.

Other ways to protect your business assets include:

  • Pay yourself a market salary based on the size and position of your business to prevent your spouse from making a claim to future profits.
  • Minimize your spouse's involvement in the business, as a spouse who has helped with daily operations has a strong legal case for a stake in the company.
  • Don't commingle business and personal finances. Keep all cash and credit separate.
  • If a divorce is imminent, be realistic about what assets you're willing to sacrifice. Giving up interest in your marital home, car, or other investments to maintain control of your business may be best for the future of your company. Liquidating your life insurance to buy out your partner may also be an option to consider.

How Can We Help?

If you are in need of legal representation or have questions about how to protect your business interests during your divorce, please call our office at (626) 683-8113 or email us at info@PasadenaLawOffice.com. Our experienced Pasadena divorce attorneys can help you receive a settlement that will protect your long-term financial interests.