Are you in business and getting divorced?

Divorce doesn't have to ruin your business. Prepare early!

Divorce affects not only your personal life, but also your business. If you built the business during your marriage, your spouse may be entitled to a portion of it, even if it is written only to you. The right legal strategy can help you protect what you've spent years building. How to minimize risks and avoid financial problems?

Author of the article: ARROWS (Mgr. Vendula Růžková, LL.M., MBA, office@arws.cz, +420 245 007 740)

How can divorce affect your business?

Divorce can affect not only you personally, but also your financial stability and the future of your business. What to watch out for?

1. The other spouse's entitlement to a share of the business

Under Czech law, companies established during the marriage or those that were financed jointly are part of the community property. Even if the company is written only to you, your spouse may be entitled to a share of it. This claim may arise even if he did not participate directly in its operation - for example, by contributing to the household, which enabled you to build the business.

2. Valuation of the company and financial impact

In a divorce, an appraisal is usually done to assess the value of the business. This process can not only be costly but also expose weaknesses in your business. If you have to bail out the other spouse, it can put a significant strain on the company's cash flow, reduce investment or even force you to sell the company in part or in full.

3. Risk of losing control of the company

As a last resort, the shares may be split between the two spouses. If there is a dispute, there is a risk that your ex-husband will be involved in decision-making or try to sell his share to a third party. This may bring an unwanted partner or investor into the company.

What claims can your spouse have against the company?

It's not just the share of the company itself. Divorce can affect other areas related to your business.

1. Share in the value of the business

If the business was established during the marriage, its value is usually part of the community property. Even if you owned it before the marriage, the appreciation achieved during the marriage may be subject to settlement.

2. Entitlement to the profits of the business

Even if the business is titled in your name alone, its profits earned during the marriage may be considered part of SJM. This means that your spouse can claim them for settlement.

3. Compensation for investment in the business

If funds were invested in the business from community property (for example, joint savings or the sale of other assets), the other spouse can seek appropriate financial compensation.

What can you do now?

Don't wait for a divorce to start dealing with the legal issues surrounding your business. The sooner you start, the better you can protect yourself.

1. Find out the current status of your business

First, be clear about whether your business falls under SJM. If it does, consider your options to protect it. Check the books, contracts and any investments made with family funds.

2. Consult a lawyer

A lawyer who specializes in family and business law can help you understand your options and devise an appropriate strategy. The right legal steps can protect your business from the unexpected consequences of divorce.

3. Enter into a prenuptial or postnuptial agreement

If a divorce is still looming, you can adjust property arrangements with a marital agreement. This can clearly outline how the business will be settled in the event of a divorce.

How to protect yourself in the future?

Businesses have several options to minimize the risks associated with divorce:

• Marital Agreement - Clearly state what is part of the marital property and what is not.
• Proper business structure - For example, ownership through a holding company can reduce the risk of losing a share.
• Regular review of assets - Keep track of what funds are invested in the business.

Divorce doesn't have to mean the end of your business. With careful planning and professional help, you can protect not only yourself, but also your business. Questions? Contact us to find out the best way to protect your assets today.