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What may happen to a business in a divorce

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When Georgia entrepreneurs start a business, they can include language in the company’s organizing documents that specifies that if there is a divorce, the business cannot be transferred to their spouse. However, if the person has already started the business, a pre- or post-nuptial agreement may also offer protection.

The agreement can establish that the business is separate property. This may also help eliminate the costly and time-consuming step of having to assess the company’s value. Another option is to establish that the spouse gets a portion of the company’s increase in value from the time of the marriage. Couples who run a business together may want to decide whether one will buy the other out in case they divorce or if they will continue to run the company together.

Whether or not there is a prenup, business owners should keep careful financial records. For example, if shared funds were used to start the business, this may affect its division. Along with funding sources, business expenses and cash transactions should be carefully tracked. A spouse who works at the company but who is not paid market rates may have grounds to ask for a greater percentage of the company’s value.

Even if the couple has a plan in place for dividing the business, they may have other property they need to divide. They might also have children, and a prenup cannot cover child custody or support, as courts won’t uphold these provisions on public policy grounds. These issues might all be resolved through negotiation with the assistance of their respective attorneys.

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