Divorce is a challenge for everyone involved. For entrepreneurs who have spent years cultivating a thriving business—a business that is suddenly vulnerable to a division or liquidation—the stakes couldn’t be higher.
In Utah, where equitable distribution laws apply, taking proactive steps with sound legal guidance can create a secure future for both you and your business. If your business was started or grew significantly during your marriage, it will likely be considered marital property and subject to a division. To protect and keep what you built, consider following these five tips:
1. Preparation is Power: Carefully drafted articles of incorporation or bylaws can help prevent a business from being easily transferred or sold due to a divorce, ensuring the owner retains control. Before divorce is even a consideration, review the corporate documents governing your business and amend them to dictate what should happen to the owner’s share in the event of a divorce. This can be especially important for businesses with unique assets or a strong brand reputation.
2. Educate Yourself: Get an attorney who is fluent in both divorce and business law and learn what you should do to protect your business. This could include prenuptial or postnuptial agreements, paying your spouse fair-market compensation for any work benefitting the business, or purposefully limiting your spouse’s involvement in the business.
3. Remain Transparent: Your books and records will be scrutinized heavily during divorce proceedings, and you will have an obligation to produce them to your spouse. Transparent records will reduce suspicion of hidden assets or income manipulation and streamline the fact discovery process. Keep your accounting accurate before and during your divorce.
4. Know the Rules: Rule 109 of the Utah Rules of Civil Procedure dictates injunction provisions which both parties must follow during a divorce. If the divorce concerns the division of property, your ability to sell, transfer, or encumber business assets may be impacted.
5. Get an Expert: As a potential marital asset, a business must be valued properly. Hire a qualified forensic accountant or business valuation expert to assess the fair market value, along with projections and risks your business may be subject to in the near future. Transfers of business assets or ownership interests may trigger capital gains or other tax liabilities. Work with your expert to understand these consequences before making any consequential decisions.
Call Millar Legal
We help people protect and enforce their rights in divorce, custody, paternity, enforcement, and modification proceedings. If you or someone you know needs help with a case, please call 801-424-5280 to schedule a consultation, or use our online scheduling tool.