When going through divorce as a business owner, one of the most difficult things to deal with can be executive compensation. Whether it is yourself or your spouse who is the executive in question, this can be a touchy subject during divorce proceedings. Here are a few tips on how to approach this issue:
Determine what is fair
This can be difficult to do, but it is important to try to come to an agreement on what is a fair amount of executive compensation. If you and your spouse are unable to agree, you may need to consult with a mediator or financial expert.
You should consider some factors when determining what is fair, and one of the most important ones is the role of the executive in question. For example, if they are responsible for the day-to-day operations of the business, their compensation should reflect that. You should also take into account other factors such as the size of the company and the industry it operates in.
Be prepared to negotiate
In most cases, you will need to be prepared to negotiate on the issue of executive compensation. This is because it is often one of the most contentious issues in a divorce. So, for instance, if you think that your spouse should receive $100,000 in executive compensation, you may need to be prepared to negotiate down to $75,000.
If you are unable to reach an agreement on executive compensation, the divorce court may make a decision for you. This is why it is so important to try to come to an agreement beforehand.
Get everything in writing
Once you have come to an agreement on the issue of executive compensation, it is important to get everything in writing. This way, there can be no misunderstanding later on down the road. Ideally, you may want to have a professional draw up the agreement so that it’s legally binding.
Dealing with executive compensation can be difficult, but if you follow these tips, it may be easier. Just remember to determine what is fair, be prepared to negotiate, and get everything in writing. If you do all of this, you will be in a much better position to deal with this issue during your divorce.