Most people don’t understand the toll that litigation can take on a person and a business. “If a couple is in a position where they have to work in close quarters or there’s any cross communication regarding who has the final say on certain decisions, things can get pretty chaotic for everyone involved,” says Nashville attorney Connie Reguli. “A tense business environment can be uncomfortable and stressful for employees and can be very detrimental to the business’s productivity as a whole.” Not to mention the tremendous financial burden of court costs and attorney fees.

Given the obvious pain and confusion that accompanies a divorce, one would think that more couples would plan ahead for such instances. But that’s just not the case. “Most people don’t do pre-divorce planning because no one wants to go into a marriage thinking they’re going to get divorced,” says Nichol, who often works with small businesses as an attorney with Stokes Bartholomew Evans and Petree. “But in the process and aftermath of divorce proceedings, people always say that they regret not knowing and doing more about divorce planning when they first went into business with their spouses.”

When making pre-divorce plans, there are three major avenues that you can take, Nichol says. If the couple is unmarried as they plan to go into business together, they still have the option of formulating a prenuptial agreement. While it might not be the most romantic option, it is customary for people to discuss their options with a divorce attorney and decide whether or not a prenuptial agreement would be appropriate for their particular case. “Most people draft prenuptial agreements in order to protect any separate assets that they have prior to their marriage,” Nichol adds. For example, say there’s a couple where both parties have already been extremely successful in their own respective businesses before deciding to marry and go into business together. In this case, a prenuptial agreement would be perfect for them. But they can also be used to develop a framework regarding how the couple would divide assets or resolve the dissolution of the business, should a divorce occur, adds Anne Russell, an attorney in the Nashville office of Stokes, Bartholomew, Evans, and Petree.

If a couple is already married, then they can enter into a postnuptial agreement. “Within the past year, Tennessee passed legislation that allows couples to use postnuptial agreements when divvying up assets,” Nichol says. This can be helpful for couples who’ve been married for a while and now want to go into business together with maximum protection.

But attempting to introduce either of these types of documents can be difficult, and for couples who want to avoid the emotional repercussions, there is, fortunately, a third option. There’s always the option of “including a buy-sell agreement in either the bylaws or articles of incorporation if you’re forming a corporation, the partnership agreement if you’re forming a partnership, or the operating agreement if you’re forming an LLC,” says Reguli, who runs her own Nashville-based private practice. A buy-sell agreement is a way to put all these provisions down in a structured way at the beginning stages of a company’s formation. Adding the buy-sell agreement into the corporate structure of the business makes pre-divorce planning less personal and more about the business itself, Nichol says. You can include all the same provisions that you would in a prenuptial agreement, without all the emotion.

Of course, though, every situation is different. “There’s no magic wand to protect every business against divorce,” Russell says. “Even prenuptial agreements aren’t foolproof, especially if they aren’t detailed enough or don’t contain just the right language.”

However, getting professional advice is a must if you want to avoid major hassles down the line, Russell adds. But it’s important to have foresight. “Many attorneys won’t even recommend exit strategies because they’re not the best business strategists,” Reguli says. “They don’t think about the overall picture from a business standpoint—it’s not their job. On the other hand, a business consultant may not be well enough versed in the law to give the best advice on available options.” So there’s a definite balancing act that must take place, and it’s important to find the best professional help available. Because it’s much easier to make decisions about these things now, in a time of peace, than it is when emotions are running high.

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