WorldWide Drilling Resource

15 FEBRUARY 2022 WorldWide Drilling Resource® Drilling Into Money Not Boring by Mark E. Battersby A Divorce-Proof Business Married owners of drilling businesses often overlook a common reason many businesses fail: divorce. In most states, one spouse’s business can be considered a marital asset or marital property, so when a couple divorces, assets need to be divided. Otherwise, an “ex” could wind up as a business partner or a fight could ensue to keep the operation from being sold in order to raise cash. Of course, if the business was started prior to the marriage, there may be some built-in protections -even in community property states. Generally, premarital assets will remain premarital assets so long as they are held separately. Establishing any business as a sole proprietorship leaves it vulnerable to future problems. Even with one spouse staying home or working elsewhere, most ex-spouses are entitled to a share of the business - often as much as half. The simplest way to divorce-proof the business is through a written agreement signed by the spouse. One answer: a prenuptial agreement. In a prenuptial agreement, couples decide in advance what portion of their business is considered separate property and what is to be considered as marital property in the event of a divorce. For a jointly owned drilling business, a prenuptial agreement can establish from the outset a 50-50 distribution of business interest to each spouse. Like a prenuptial agreement, a postnuptial agreement can help couples establish which portion of the business each owns if they become business partners after getting married and don’t have a prenuptial agreement. If the thought of a pre- or postnuptial agreement makes either party uncomfortable, an agreement can be drawn up and signed that will provide the spouse with some financial protection in exchange for leaving control of the drilling business as it stands. Such an agreement can require selling the business upon divorce at a value to be determined by a third party. One bright spot may be that it’s rare a business ends up being sold to satisfy a divorce settlement. It’s because a sale would deprive the owner of the future income which might be necessary to make all payments required under the settlement. Not too surprisingly, early steps are critical to protect the business in the event a marriage ends up on the rocks. This means being prepared for all eventualities and seeking professional help. Mark Mark E. Battersby may be contacted via e-mail to michele@ worldwidedrillingresource.com

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