No one gets married planning on an unhappy ending, yet the reality is that approximately 40 percent of marriages in Canada end in divorce.

For small business owners, this can pose a challenge: how can you protect your business if you end up getting divorced?

Despite how common it is, many small business owners are unprepared for the possibility of a divorce. Whatever your current situation, here are some things to keep in mind to help mitigate the impact of a divorce on your business.

Protect your business early

If you own a business, there’s a good chance it’s your most important and most valuable asset. And like any big asset, it should be protected.

A divorce can have a major impact on a business if it’s included in a settlement. The overall divorce process can also make it difficult for you to focus on the day-to-day running of your business.

The importance of protecting your small business before initiating (or even considering) divorce cannot be overstated – and the earlier, the better.

Ideally, protective measures should be in place well before marriage. Once divorce is on the table, if your business isn’t protected, it’s probably on the table, too.

Prenuptial agreements

The most common way to protect your business is with a prenuptial agreement, often called a prenup.

A prenup is a binding contract signed by each partner before their wedding outlining what happens to all assets, property, and income in the event of divorce, separation, or death.

A prenup is the fastest, easiest, and least expensive way to protect your small business in the event of a divorce. If one or both partners in your marriage are small business owners (either together or with different businesses), the complexity is multiplied, so a prenup is strongly advised.

Business-specific agreements

Shareholder, partnership, LLC, and buy/sell agreements offer different types of protective measures. Each of these agreements can include provisions that protect the interests of the business owners – including you and any co-owners – if one of you ends up getting a divorce.

For example, your agreement can require that unmarried shareholders implement a prenup if they plan to marry. Your agreement can also require a waiver from an owner’s fiancé that removes them from any future interest in the business.

Another option is to impose restrictions on the transfer of shares. For example, your agreement can prohibit the transfer of shares without approval from other partners or shareholders.

Alternatively, the other owners(s) can be given the right to purchase the shares or interest of any divorcing parties, which gives the existing owners the option to maintain control of the business.

Mitigate risk with holistic financial planning

Whether you’re running a business or building a loving, enduring marriage, real life is hard work, and it doesn’t always go as planned. With divorce, being a fact of life for many Canadian couples, planning for this possibility is an important step for any small business owner.

At Rubach Wealth, we help business owners plan for an uncertain future and mitigate risk as part of a holistic approach to wealth management. This means looking at your life in its entirety and bringing everyone to the table – including lawyers, accountants, and investment specialists – to help you make the best decisions given your unique needs.

Divorce is not an easy topic to address. However, by having frank conversations and asking tough questions now, we can help you minimize the financial harm that sometimes accompanies the heartbreak of a divorce.

If you have questions about protecting your small business in the event of a divorce, please contact us at 647.349.7070 or info@rubachwealth.com. for a confidential conversation.