Protecting Business Assets In A Divorce

by Legal 23 February 2024

Protecting Business Assets In A Divorce

Divorce proceedings invariably include the distribution of assets and liabilities. Assets may include personal and business properties. If you are a business owner, you have likely worked long and hard to set up your firm. You no doubt identify yourself with the business and make every effort to see it prosper. Unfortunately, circumstances in your life can lead to a divorce from your spouse due to dissatisfaction and divergent interests. You might be taken aback by this turn of events. However, it is a good time to look at protecting your business assets because these can have the most financial and personal value for you.

It is commonly seen that people who start a business and get married young are full of energy and spend most of their time attending to their business interests. They believe that they can retire with a good value for their business and then relax by selling it off or handing it over to the next generation. But if it doesn’t work out, they have to make every effort to protect their business interests in case of a divorce.  

The following strategies can be used to help protect your business assets from liquidation in the event of a divorce.

Maintain Good Records And Keep Business And Home Finances Separate

One of the best things that you can do to protect your business interests is to keep a detailed record of what you are doing for the business, separate and distinct from what you are doing for your family. This not only requires good financial planning and discipline but can be accomplished quite well if you have a good accountant. You will have to open up separate accounts for the business and preferably set it up in a place that is distinct from your home premises. Never use business accounts to finance family expenses and vice versa.

Remunerate Yourself Adequately

As a business owner, you might be inclined to believe that all the assets belong to you. If you invest family funds in the business, your spouse’s lawyer may argue that your spouse is entitled to a bigger share of the business assets. Do not make the mistake of paying yourself less than a good salary in the hope that the business will prosper and need the investment. A divorce can put a dent in the business plans and make it a valuable asset for your spouse’s settlement.

Remove Your Spouse From The Business Interests

If signs of a divorce are imminent, you would do well to act quickly to remove your spouse from the business. If they were a business partner and helped set up the business, then the longer they worked for the company, the easier it would be for their lawyer to claim a share of the value of the business.

Be Prepared To Give Up Other Assets

If you truly know the value of your business and want to protect it at all costs, then you have to be prepared to give up some other assets to negotiate a settlement with your spouse. You could liquidate some investments, and sell artwork jewelry, or other assets of value. Try to keep the ownership of your business intact by selling other assets. 

Get A Fair Valuation For Your Business

Experienced Boston divorce attorneys at Wilkinson & Finkbeiner emphasize the importance of getting a fair valuation of your business by choosing a financial expert to evaluate it. Then, compare this estimate with the one given by the court-appointed evaluator. Look at both current revenues and future projections to determine the value of your business. Having an accurate business valuation is significantly beneficial when working with an attorney through the process of asset division.

Make A Series Of Payments Over Time

Rather than going for one big payment, you can arrange with your spouse to make payments in regular installments. This should meet the requirements of your spouse if they want reliable cash flow. You can take a bank loan or remove some money from the business earnings.

Raise Capital Through An Employee Ownership Plan

If you need cash to make a financial settlement with your spouse, you may consider asking your employees to invest in a stock ownership plan. They will work harder as well to make the business successful. You could also ask some angel investors to pay cash for a stake in the business. It is not common for a business to be sold to meet a divorce settlement, as the business owner would be deprived of the means to make payments to their spouse.

Sign A Prenuptial Agreement

If you become a business owner before your marriage, have your spouse sign a prenuptial agreement that prevents them from laying claim to the assets of the business in the event of a divorce. 

Sign An Early Postnuptial Agreement

Even if you missed the earlier opportunity, you can make amends by signing a postnuptial agreement soon after the wedding. If this is done long before the divorce, it stands a chance of being held up in court and helps you retain ownership of your business.

Place The Business In A Trust

If you have designated the business as a trust enterprise, you do not own it personally and are only its founder and manager. It is not a marital asset and cannot be considered for settlement. This strategy also protects its value and growth.

Create A Buy-Sell Agreement

A buy-sell agreement is a legal and financial agreement that helps retain your ownership of the business. It can be made between you and your spouse or even include other business owners. If you are undergoing a divorce, this change in your legal status will give you and your partners the right to buy off your spouse’s share in the business, deprive them of voting rights, and limit your spouse’s ability to acquire ownership of the business.

Invest In An Insurance Policy

You can invest in a whole life insurance policy that builds cash value. Liquidating it can provide the funds to buy off your spouse’s share in the business if this is needed. It is one of the final options you can use to protect your business during a divorce.


It is shocking to note that divorces are fairly common in America. It is commonly estimated that between 35 and 50% of marriages end in divorce, with the rate still higher for second marriages. It would thus be prudent to set up legal and financial agreements that work in your favor by protecting your business assets from being attached to a divorce settlement. Hiring an experienced financial expert and divorce lawyer can help protect your business assets as you find other ways to negotiate a divorce settlement.  

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With an adept skill of curating content on multiple genres, Mony has harnessed success as a Content Writer. Find her sharing profound thoughts and opinions on business and startups. She also loves talking about lifestyle, beauty and fashion.

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