When building a business, you’re bound to encounter some challenges. As a result, you need to protect your business at all costs. Here, the main focus is protecting a family business while divorcing your partner. There is a need for careful corporate planning to ensure that the family business will thrive for many years, even amidst issues such as family turmoil.
A corporate or family attorney is well suited to weighing in on such matters, and they can offer tips that will make it possible to protect and grow the family business while also accounting for the risk of divorce and marriage. Some of the tips that can help safeguard a family business even when getting a divorce include:
Establish Formal Corporate Inspections and Maintain Them
A strong corporate shield is supposed to insulate and shield personal assets from claims by family members who are disgruntled. The assets must also be protected from other parties, such as third parties. It is important to ensure that by-laws are in place, a board of directors, directors, and shareholders meetings with resolutions and minutes, and stock certificates should also be issued. Without such items, a court may consider that personal assets and a business are similar entities. As a result, each of these assets can be easily reachable via litigation, and in this case, we’re talking about a divorce.
Have Buy-Out Provisions that are Involuntary
There needs to be an agreement in place that if a certain event takes place, for example, the stockholders decide to divorce, the stock will be sold and that it would be mandatory; this means that the shares will finally end up in the hands of a single spouse and not an in-law. The provisions will set up a mechanism that will be used to calculate the sale price and also provide the method of payment and timing.
Implement Safeguards for the Employment of In-Laws
In a family business that’s already thriving, when children become adults and propose that their spouse should join the company, safeguards must be in place before they can be employed. The employees who are in-laws need to be qualified, and they also need to have the right qualifications for the job they’re applying for. Also, their job description needs to be clear. They also need to take part in benchmarks for performance and the pay scale should be set. Their employment contract can also be terminated at will.
Ownership Needs to Stay in the Family
As a business owner, there is a need to have an agreement that restricts family members from holding stocks. The succession of the company’s ownership is supposed to be set up so that if an issue such as death or divorce happens, the business will still be under the confines of the family bloodline.
Coordinate with Other Legal Protections
Corporate documents come in handy since they can work seamlessly with estate planning documents and post-nuptial and pre-nuptial agreements. To do so, the trusts, corporations, and matrimonial counsel need to communicate effectively.
A family business is a precious entity that should be safeguarded by all means possible. To do so, it is important to forecast issues such as divorce and how to ensure the family business will continue to thrive amidst the problems that arise in such instances. The tips shared above can be useful in helping you manage risks effectively, contributing to the safety of your business and allowing you to operate with greater confidence.
Disclaimer: “The content in this article is provided for general knowledge. It does not constitute legal advice, and readers should seek advice from qualified legal professionals regarding particular cases or situations.”
Published by: Nelly Chavez
