Protecting Your Business During Divorce: What Every Entrepreneur Needs to Know
When you have built a business from the ground up, the idea that it could be put at risk during a 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. We help business owners navigate the legal system and make informed, strategic decisions aimed at protecting their businesses and legacies.
The High-Stakes Intersection of Business and Divorce
Many clients believe that because their spouse was not actively involved in the business, their spouse has no claim to it. In Michigan, that is rarely the case. Businesses started or grown during a marriage are often considered part of the marital estate, even if only one spouse managed the company.
This reality 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 require careful protection.
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 determine how much of your business could be considered a divisible asset. Without experienced guidance, you risk an assessment that does not accurately reflect the business’s value, which can heavily impact settlement terms.
Asset Division
Michigan follows equitable distribution principles, meaning marital property is divided fairly, though not necessarily equally. If your business is deemed marital property, it could be subject to division. A spouse’s indirect contributions, such as supporting your career or managing the household, may be enough to create a legal interest in the business.
Loss of Control
Without proper legal safeguards, you could face the potential for forced liquidation, buyouts, or a court order awarding a stake in the company to your former spouse. A temporary disruption in leadership or internal conflict alone can damage your operations and reputation.
How to Prepare Your Business for Divorce
Taking proactive steps can help you manage risk and protect your company’s long-term health.
Organize Documentation
Begin compiling key documents such as:
Tax returns (past 3-5 years)
Profit and loss statements and balance sheets
Partnership and shareholder agreements
Financial projections and payroll records
Key client contracts
This information helps streamline the discovery process and gives your legal team a full picture of your business’s structure and value.
Maintain Financial Separation
Avoid commingling personal and business funds. Pay yourself a reasonable, documented salary and maintain clear records of all major financial decisions. This transparency can strengthen the argument that the business is a separate asset.
Legal Strategies for Business Protection
Prenuptial and Postnuptial Agreements
A properly drafted prenuptial or postnuptial agreement is one of the most effective tools for protecting a business. These documents can specify how the business will be treated in the event of a divorce, limiting future disputes.
Buy-Sell Agreements
If your business has multiple owners, a buy-sell agreement can include terms to prevent an owner’s shares from being transferred to an outside party, including a former spouse. These contracts are critical but often overlooked.
Structured Settlements
Your attorney can work to negotiate a settlement where other marital assets are used to offset the value of a business interest. This approach can involve trading interests in investment accounts, real estate, or retirement plans to allow you to retain full ownership of the company.
Why the Right Legal Team Matters
Handling a divorce as a business owner requires a firm with deep experience in both family law and complex financial structures. At Thacker Sleight, our collaborative approach ensures that your legal team works closely with valuation experts, tax professionals, and financial strategists to craft a strong and comprehensive case.
Our clients benefit from counsel 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 your livelihood.
Conclusion: Preserve What You’ve Built
You’ve worked hard to create something of value. Your divorce does not have to 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 are an entrepreneur or business owner considering divorce, we invite you to discuss your situation with us. Our team is ready to support you with understanding, discretion and clarity at every step.
This material is not legal advice. No attorney-client relationship is formed by reading this content. Please consult with an attorney for advice on your specific situation.