Under Florida divorce law, businesses are subject to equitable distribution. This essentially means that it can be considered a marital asset that is divided as part of the resolution of all divorce-related issues.
Small-business owners, who have shed blood, sweat, and tears for their endeavor, find it surprising and frightening that a business might be divided in divorce. Further, this can be disruptive to the spouse of the small business owner; if the business begins failing due to protracted fighting or litigation, the spouse’s ability to receive alimony or child support is greatly reduced.
One way to protect a business from the fallout of divorce is to enter into a prenuptial agreement or, if you are already married, into a postnuptial agreement.
In a prenuptial or postnuptial agreement, the parties can decide that the business will be considered non-marital property, and thus not subject to divorce proceedings. It is important that both parties engage in thorough financial disclosure prior to entering into the agreement, so that there is no claim in the future that the agreement should be invalidated because the non-business owner spouse did not know what he or she was giving up. Accordingly, it is usually beneficial to engage a neutral financial professional to ensure there is complete financial transparency.
Even though a small business protected by a prenup or postnup might not be subject to equitable distribution in divorce, it would still be seen as a source of income so that support can be paid from one spouse to the other.
The truth is, the question of whether to enter into a prenuptial or postnuptial agreement is a difficult conversation to have with a fiance or spouse. A more palatable option may be to see if the other party would be open to a new method known as “collaborative marriage planning.”
In collaborative marriage planning, each client is represented by an attorney, and the attorneys agree that they will never engage in litigation on behalf of one spouse against the other. Unlike attorneys who draft traditional prenuptial or postnuptial agreements, this takes away incentive from the attorneys to stoke conflict between the spouses or spouses-to-be.
Collaborative marriage planning is not focused on divorce. Rather, it is focused on married life. A neutral facilitator (usually with a family dynamics background) will help the parties engage in difficult conversations (such as parenting philosophy) to explore each of their interests. The facilitator will also help the parties learn communication and conflict resolution techniques, so that fights in the future are less likely to result in divorce.
Further, a neutral financial professional will help ensure that each spouse knows everything about the other spouse’s income, assets, and debts. He or she might help with a valuation of the business. The financial professional will also help the parties determine whether they want to have joint or separate accounts (or combination thereof) once they are married, as well as help them create individual and family budgets to ensure future financial success.
Though collaborative marriage planning is not focused on divorce, one of its side benefits could be the drafting of an enforceable prenuptial or postnuptial agreement that protects the business in the event of divorce.
If you have questions about how a prenuptial, postnuptial, or collaborative marriage agreement can help protect your Tampa Bay business, schedule a consultation with Family Diplomacy: A Collaborative Law Firm at (813) 443-0615 or CLICK HERE to fill out our contact form.
Adam B. Cordover is co-author of an upcoming American Bar Association book on Building A Successful and Rewarding Collaborative Law Practice. Adam is one of the most experienced collaborative attorneys in Tampa Bay and former president of Next Generation Divorce, growing it to become the largest interdisciplinary collaborative practice group in the state of Florida.