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  4.  » How divorce can make or break a family owned business

Couples face many uncertainties when they decide to file for divorce. It is difficult to predict who will claim primary custody of the children, who will keep the current home, or what will happen to the family business.

Depending on the nature of your business, some or all of it may be community property. By understanding how the division of marital assets might affect your family business during a divorce, you can determine what steps you might take to protect it.

How divorce affects the family business

Any family-owned business, even one you inherit from your parents, will likely fall under marital asset division to a certain extent. Any income you receive through your business during the course of your marriage is a marital asset, and so too is any portion of your business that you build using marital funds. Your spouse, therefore, has a claim to some or all of the business, especially if they contribute their own labor or income to the company.

How to protect your family business during a divorce

The best way to keep your business intact through a divorce is by entering a marriage agreement with your spouse. With either a prenuptial or postnuptial agreement, you can negotiate terms on which assets you will keep and which will go to your spouse. The court must then honor the terms of this agreement, regardless of standard asset division procedures.

Divorce often breaks family businesses apart, often necessitating complete liquidation for the sake of distributing assets equitably. However, forming a legally-binding agreement can ensure that your business makes it through the divorce stronger than ever.