Your business is one of the most important things you own. But when you go through a divorce, your business can be up for division between you and your spouse. This division can financially hurt your company.

Depending on how you and your spouse decide to split your company, divorce can put your business at risk. Here are a few ways divorce can affect your business:

  • Drain your finances – If you want to ensure your spouse doesn’t get ownership of your business, you can buy out his or her share. But paying out a large sum can leave you strapped for cash. And with your company cash poor, you may find yourself unable to keep the business going.
  • Affect your business partners – When you are a co-owner of a company, your divorce can affect your business partners. They may have to include your spouse as a new co-owner or try to buy you out.
  • Lose your business to your spouse – When you and your spouse are co-owners, you may have to decide on continuing to be business partners or divide the company. You may have to give up ownership to your spouse. Or you may have to shut down the business if you decide you can’t work together.

Planning can reduce the risk of negative effects

While divorce can have adverse effects on your business, you can take measures to protect the company from divorce. With a prenuptial agreement, you set terms for how to treat the business if you and your spouse decide to divorce. You can agree on a fair buy-out share for your spouse, or you can have your business be a non-marital asset.

If you have partners, you can create a buy-sell agreement so that partners have a plan to buy out a divorcing owner.

Divorce can have a significant impact on your life. But planning for the adverse effects can ensure that your business stays alive.