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What Happens To A Small Business In A Divorce?

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If you have a small business, or even a publicly traded one, it’s wise to plan ahead in the case of a divorce. Divorce can be devastating for business owners who don’t plan ahead for such events as part of their wealth management.

In Wisconsin, married persons’ ownership of a company is considered marital property that is subject to equal distribution in the event those business owners divorce. And, with 40 to 50 percent of married people ending their relationship in divorce, it’s something executives need to consider, even in the best of times. A qualified Milwaukee family law attorney can help you keep your business in the event of divorce.

Here are a few ways to protect your business before a divorce:

  • Shareholder agreements, employment agreements and buy-sell agreements: These can help prevent transfer of ownership during divorce by stipulating that no partner or shareholder can transfer ownership to a non-employee.
  • Business structure: Courts may assume that all the income from a subchapter S corporation is earned by the recipient and make alimony or child support payments based on this number. Converting to a C corporation prior to divorce can eliminate this problem.
  • Pre and postnuptial agreements: These can ensure the business is unaffected by divorce, although the division of assets in the marriage dissolution still has to be fair and equitable.
  • Unvested stock options or unvested unrestricted stock: These can be considered marital if earned during the marriage. If a business stipulates that stock awarded is for a future incentive and not rewarded for past actions, it can impact if and how the non-employee benefits.

These options are best visited with a trusted financial advisor well before any talk of divorce is underway. If you are facing divorce and are concerned about losing all or part of your business, call the Karp & Iancu, S.C. Firm.

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