On behalf of Stange Law Firm, PC posted in Divorce on Thursday, May 21, 2020.
When you plan for divorce, something that you may need to consider is how your business’ debt could affect you and your ex-spouse in the future. Take, for example, a situation in which you borrowed $25,000 in loans to support your business. If you and your spouse both take part in the business, then you both could be on the hook for paying back that debt after divorce.
Similarly, if you run a business and have borrowed against it to support your family, that money could, arguably, be a debt of the business, not a marital debt. That means that the person who has the business will end up having to pay back the debt, unless you can prove that the money was used for your family.
How can you protect your business during divorce?
One of the important things to do is to keep your business assets separated from your marital assets. Don’t use your business assets for personal purposes because if you do, you could end up in a bind. If your spouse argues that they didn’t know you borrowed against the business or you don’t have supporting documents to show that you borrowed money to support your family, you could end up with a business debt that isn’t divided upon divorce (and isn’t considered to be a marital debt).
If you did mix or mingle your business and personal assets, you may want to get a forensic accountant on board right away. They’ll be able to track where money went and be able to show when you used business funds for nonbusiness purposes. This could be beneficial, especially if you borrowed a large sum against your business to support your family home, spouse or other aspects of your personal life.