How Can Business Owners Protect Their Assets During a Divorce in South Carolina?

How Can I Safeguard My Business Assets During a Divorce?

As a business owner in South Carolina, you may be wondering how to protect your business assets during a divorce. The first step is understanding the legal landscape surrounding marital property in South Carolina.

South Carolina uses the equitable distribution model, meaning marital property is divided fairly, though not always equally. Marital property encompasses all assets and debts obtained during the marriage, irrespective of whose name appears on the title. This can include a business started or grown during the marriage.

Can I Protect My Business with a Prenuptial or Postnuptial Agreement?

Yes, one of the most effective ways to protect your business assets is through a prenuptial or postnuptial agreement. These legal documents specify how assets would be divided in the event of a divorce.

A prenuptial agreement is signed prior to marriage, whereas a postnuptial agreement is signed after the marriage occurs. Both types of agreements can designate the business as separate property, exempt from division in the event of a divorce. For these agreements to be valid in South Carolina, they must be in writing, signed by both parties, and entered into voluntarily without any coercion. Both parties are required to fully disclose their assets and debts, and the agreement must be fair to both.

How Can I Use a Trust to Protect My Business?

Another strategy to protect your business assets is to place the business in a trust. A trust is a legal structure that manages assets for the advantage of designated individuals, typically the business owner and their family.

When a business is transferred into a trust, it becomes the trust’s property and is no longer viewed as a personal asset. This means that in the event of a divorce, the business would not be part of the marital property subject to division.

When setting up a trust, work with an experienced attorney who understands the nuances of South Carolina law.

What Role Does a Buy-Sell Agreement Play in Protecting My Business?

A buy-sell agreement is another tool that can help protect your business during a divorce. This agreement, typically entered into with other business partners, outlines what happens to a partner’s share of the business in the event of life changes, including divorce.

For instance, the agreement can specify that upon divorce, the business owner’s share must be sold back to the company or to the other partners. This can prevent an ex-spouse from becoming an unwanted partner in the business.

What If My Spouse Works in the Business?

If your spouse has worked in the business or contributed to its growth during the marriage, they may have a claim to a portion of the business. This can complicate matters, as it may be difficult to determine the exact value of their contribution.

In such cases, it may be necessary to get a business valuation to determine the business’s worth. This involves analyzing the business’s financial statements, market conditions, and other factors.

What Happens If I Have to Divide My Business?

If your business is considered marital property and must be divided, there are several ways this can be done. One possibility is to sell the business and split the earnings. However, this may not be ideal if you wish to continue running the business.

Another option is to buy out your spouse’s share of the business. This can be done by trading other assets of equivalent value or setting up a payment plan. Alternatively, you could continue to co-own the business with your ex-spouse, although this requires a good working relationship.

Can I Keep My Business as Separate Property?

Yes, you can. In South Carolina, assets obtained prior to marriage are typically regarded as separate property and are not divided in the event of a divorce. If you owned your business before you got married, it could be considered separate property. However, any increase in the business’s value during the marriage could be considered marital property.

To maintain your business as separate property, it’s crucial to keep your business and personal finances separate. This means not using marital funds to support the business and not using business assets for personal use. It’s also important to pay yourself a competitive salary from the business to show that the business income is being shared fairly with your spouse.

What If My Business is a Family Business?

If your business is a family business, a divorce can complicate matters further. In South Carolina, if both spouses have contributed to the business, it may be considered marital property and subject to division.

In such cases, you may need to consider options such as one spouse buying out the other’s share, continuing to co-own the business, or selling the business and dividing the proceeds. An experienced attorney can help you consider the impact of these decisions on other family members involved in the business and work towards a solution that protects your business and respects the interests of all involved.

How Can an Experienced Attorney Help Protect My Business Assets During a Divorce?

An experienced attorney can help you understand the complexities of South Carolina law and devise a strategy tailored to your specific situation.

An attorney can guide you in drafting a prenuptial or postnuptial agreement, setting up a trust, or creating a buy-sell agreement. They can also represent your interests during property division negotiations or court proceedings.

Remember, every situation is unique, and what worked for one business owner may not work for another. Get legal advice that is tailored to your specific circumstances.

If you’re facing a divorce and are concerned about protecting your business assets, call The Howze Law Firm LLC today at 803-266-1812 for a confidential consultation.