Everyone goes into marriage with the best intentions, similar to the plans they have when starting a business. No one wants a marriage to fail, but it happens far too often. It means entrepreneurs need to consider how their marriage may influence business. Luckily, there are during a nasty divorce.
Maintain proper business practices, including incorporating
With any small business, it is important to incorporate. When you incorporate, you establish the starting date of the business. You need to follow appropriate business practices, which includes paying yourself a reasonable wage and having annual meetings to elect officers. Some owners try to wait to compensate themselves until the business is thriving. However, his can hurts your business during a divorce proceeding.
If you do not incorporate, you could be required to pay alimony and child support based upon your gross business income rather than the businesses income after expenses. When courts calculate income based on the Arkansas Supreme Court formula, they do not consider expenses. The best way to avoid this argument is to bring home a regular paycheck, like any other employee.
Keep family and business separate
Arkansas is a marital property state. If the business is formed during the marriage, it will be considered marital property unless that property division is not equitable. However, business started prior to marriage belongs to the person starting the business unless changed during the marriage. Most small business owners feel temptations to include relatives or spouses in their growing company.
However, when you intertwine business and family, your business may ultimately become a marital asset. In Arkansas, through equitable distribution. Essentially, the court decides a fair way to separate all shared property between two spouses.
If your business is marital property, your spouse is entitled to a fair portion of that company. If they worked with you helping build the company, the court will most likely award them some share of the company. To avoid this, keep your family out of your business.
Learn to compromise
You may do everything right, and the courts may still want to award part of your business to your spouse. In this case, you want to create a compromise between you and your spouse. You could offer another asset in exchange for sole ownership in your company, or you could make small payments over time to payout your spouse in your business.
If you are dead set on not sharing your business, you need the right representation to ensure your company isn’t eligible for property division. Consider all your options before bringing your business into court.