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Keep your business safe during divorce

Happily ever after isn't a given after you say, "I do," unfortunately, and if the divorce comes around, all your financial assets could be at risk. Divorce is a harrowing ordeal for anyone, but when you're a small-business owner, it can affect even that.

If you’ve put your heart and soul into a company, you’ll likely want to take certain steps to protect it before you have to undergo a divorce.

Be aware of what’s at risk

There are many elements that go into dividing assets during a divorce. Your spouse has no rights to what’s called separate property.

This includes an inheritance intended solely for one spouse, a gift to only one spouse from a third party, a property that was owned before the marriage, and pain-and-suffering compensation that was a part of the settlement of an injury lawsuit.

That being said, if the separate property is mixed with that of your spouse, then the lines may have to be redrawn. For example, if you inherited the business from your parents, and you filed your spouse’s name as a co-owner, the company will be at risk for separation.

Any property identified as marital property, which means it was shared between the two parties during their union, is at risk during a divorce. This can include cars, houses, retirement plans, home businesses, other motor vehicles, and other acquisitions.

If your business was formed at home or as a sole proprietorship with joint money, there can be a variety of risks for your business. Your risk depends on the situation.

In some cases, your firm will already be protected. For example, if your company was created before the marriage existed, and you have separate property and assets for it, your spouse won’t have a stake in it.

On the other hand, if you formed a sole proprietorship while you were married, and your business and personal assets were intertwined, your business may be eligible for division.

Protect your business now

You don’t want to stress about losing your company during this difficult time. To protect yourself and your operations, here are some steps you can take.

Separate all business property and assets

If your business isn’t currently treated as separate property, make it that as soon as possible. Don’t dip into your personal accounts to finance business ventures, for example.

Your business accounts should have the business name on them, and your spouse should not be allowed to withdraw money at any time. If you’ve performed due diligence and separated these accounts, protecting your business during divorce should be much easier.

File as an LLC

Remove the “sole proprietorship” title from your business as soon as you can. In most sole proprietorships, the owner’s personal finances and interests are inextricably linked with the business.

An LLC places your business responsibility completely separate from your personal accounts. Your spouse won’t be able to touch it.

Divide personal and business accounts

Personal assets can be negotiated in the divorce, but if you’ve separated your personal and business goods, you should be fully protected. Incorporating your business should cover most of the problem, but try to comb through every account and remove your name or your spouse’s from all the business accounts.

In addition, maintain good records for both your family and business finances. Don’t borrow from your personal accounts to invest in your business and vice versa. The lines must be clearly defined if you want to maintain solid control of your firm through a divorce.

Pay yourself

Many business owners work for free over several months and even years before they start to pay themselves. They’ll live off savings and pinch every penny to enable the company to thrive.

A good divorce attorney might use that to argue that the spouse deserves payment for those months of cash-flow deprivation, and make a case for tapping your business. However, if you pay yourself a salary, then it’s easier to separate your business and personal lives.

Your spouse might want a portion of the operations, but he or she won’t be able to stake a reasonable claim on anything more than the salary that was paid from it.

Uninvolve your spouse

Many business owners involve their spouse actively in the business. You marital partner might keep the books or help with the marketing.

You might even have made your wife or husband a partner in the business. The more prominent a role your spouse has in the company, though, the easier it will be to claim a portion of the outfit in a divorce. It’s usually best to separate the business and your family for the good of your company.

Get a prenuptial agreement

If your business existed before you were married, a prenuptial agreement can save you a lot of hassle. This document separates the business property and its assets from your personal assets.

The business will be off the negotiating table as a result. Typically drawn up at the time of the wedding or shortly thereafter, a postnuptial agreement can also protect you if it was signed well before the breakup of the marriage.

Be warned that many judges tend to be skeptical of postnups, however, so yours might not hold up in court. You’ll have plenty of things to worry about during the divorce, but your business need not be one of them. Take the steps above now to protect yourself and your business.

About Boris Dzhingarov

Boris Dzhingarov graduated UNWE with a major in marketing. He is the CEO of ESBO ltd brand mentioning agency. He writes for several online sites such as,,, Boris is the founder of and

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