Protecting Your Business During Divorce: What Every Entrepreneur Needs to Know
When you’ve built something from the ground up, the idea that it could be put at risk during divorce can be unnerving. For entrepreneurs, executives, and business owners, a divorce is not just a personal transition. It is a moment where your livelihood, your employees’ futures, and the company you’ve built may all hang in the balance.
At Thacker Sleight, we understand how high the stakes are. That is why we help business owners not only navigate the legal system but also make informed, strategic decisions that protect their businesses and legacies.
The High-Stakes Intersection of Business and Divorce
Many clients come to us believing that because their spouse wasn’t actively involved in the business, they have no claim to it. In reality, that is rarely the case. In Michigan, businesses started or grown during a marriage are often considered part of the marital estate, even if only one spouse managed the company.
This can raise serious concerns about ownership, control, valuation, and confidentiality. Whether you are the founder of a closely held business, a stakeholder in a partnership, or the CEO of a family company, your financial and legal interests must be carefully protected.
Key Risks to Business Owners During Divorce
Business Valuation
Your business will likely be subject to a formal valuation during the divorce process. Courts may use different methods, including market-based, income-based, or asset-based approaches. These valuations are not just about numbers, they determine how much of your business could be considered a divisible asset. Without proper documentation and guidance, you risk an undervalued or overvalued assessment, which can heavily impact settlement terms.
Asset Division
Michigan follows equitable distribution principles, which means marital property is divided fairly, not necessarily equally. If your business is considered marital property, it could be subject to division. Even if your spouse never worked in the business, if they contributed indirectly—by supporting your career or managing the household—it may be enough to create a legal interest.
Loss of Control
In the absence of legal safeguards, you could find yourself facing the potential for forced liquidation, buyouts, or worse, a stake in the company being awarded to your former spouse. Even a temporary disruption in leadership or internal conflict can damage your operations and reputation.
How to Prepare Your Business for Divorce
There are steps you can take now to avoid unnecessary risk and protect your company’s long-term health.
Organize Documentation
Begin compiling key documents such as:
Tax returns for the past three to five years
Profit and loss statements
Balance sheets
Partnership and shareholder agreements
Payroll records
Financial projections
Client contracts
Operating procedures
Not only will this streamline the discovery process, but it will also give your legal team a full picture of your business’s structure and value.
Keep Finances Separate
Avoid commingling personal and business funds. Pay yourself a reasonable salary and document all major financial decisions. This creates transparency and strengthens your argument that the business should remain a separate asset.
Legal Strategies for Business Protection
Prenuptial and Postnuptial Agreements
Having a properly drafted prenuptial or postnuptial agreement is one of the most effective ways to protect your business. These documents can specify what happens to the business in the event of a divorce, limiting exposure and future disputes.
Buy-Sell Agreements
If your business has multiple owners, a buy-sell agreement can include terms to prevent outside parties, including a former spouse, from becoming a shareholder. These contracts are often overlooked but can be critical in divorce.
Structured Settlements
Rather than selling or dividing the business, your attorney may be able to negotiate a settlement where other assets offset the value of the business interest. This could include investment accounts, real estate, or retirement plans.
Confidentiality Agreements
If your business involves proprietary processes, intellectual property, or sensitive client information, legal tools can be used to keep records sealed or limit what is disclosed in court.
Why the Right Legal Team Matters
Handling a divorce as a business owner is not a routine legal matter. It requires a firm with deep experience in both family law and complex financial structures. At Thacker Sleight, we don’t operate in silos. Our collaborative approach ensures that your legal team works closely with valuation experts, tax professionals, and financial strategists to craft the strongest case possible.
Our clients benefit from a legal team that understands how to protect a business and its owner without escalating unnecessary conflict. We advocate with strength, strategy, and sophistication, always with an eye on preserving both your livelihood and your legacy.
Conclusion: Preserve What You’ve Built
You’ve worked hard to create something of value. Your divorce should not undo that progress. With the right preparation and legal team, it is possible to protect your business, avoid public fallout, and preserve what matters most.
If you’re an entrepreneur or business owner considering divorce, let’s talk. Our team is ready to support you with unmatched expertise, discretion, and clarity at every step.