Protecting Your Family Owned Business During a Michigan Divorce

When you walk down the aisle next to the person of your dreams, chances are the last thing you’re thinking about is how to protect your investments against them in the future if it your marriage goes to hell in a handbasket. But given the divorce rate these days, it would be silly not to be aware of the possibilities and to plan ahead for all eventualities. And let’s be real, one of those very possible eventualities is divorce. Here in southeast Michigan and all over the Metro Detroit area, family businesses end up being subject to scrutiny and valuation during divorce cases. 

A man in a work shirt sitting at a table making notes in a book while he looks at a laptop screen

If you’re a small business owner here in Oakland County (or in Livingston County or Macomb County) and you’re planning to tie the knot with the love of your life, we’d like to share a few tips with you on how to protect your business in the event your marriage goes sideways at some point. When you consider how hard people in Troy, Royal Oak, and Bloomfield Hills have worked to keep their family businesses running and profitable during the recent pandemic, losing all your efforts in a divorce would be utterly heartbreaking.

A prenuptial agreement is a must if you own any interest in a family business!

You’ve probably heard the joke about how it’s great to be your own boss, because you get to decide which 16 hours of the day you work. Only, if you’re a business owner, you know it’s not really a joke. Starting a business requires hard work, dedication and commitment. You pour your heart and soul (and usually the contents of your savings account as well) into your work. Because it’s personal. It succeeds or fails based on your efforts and maybe the hard work of your parents or grandparents. 

Having to divide it up and award half of your business to your spouse during a divorce in Oakland County would be devastating. Especially if you spent so much time and effort building it from the ground up before they were even in the picture! That’s why, if you own a business in Novi, Farmington, or Ferndale, and you’re considering getting married, you absolutely need a prenup to protect it. Talk to a family law attorney before tying the knot about the best way to protect your business right from the start. Definitely do not wait until the last minute to talk with a family law attorney. Ideally you should start those discussions at least 6 months before you walk down the aisle. 

Don’t use marital funds in your business

Another way to protect your business is to make sure you keep your business funds and your marital assets separate. Making purchases for your business with cash you and your spouse earned while married, could mean they could later claim to have contributed financially to the growth and support of your business. In that case, they might try to claim to have a legal right to some of your business assets when it comes time to divide up your property.

The best way to attempt to avoid this is to keep your personal, or family finances completely separate from your business finances. If you’re not sure how to do this, or you have questions about how to protect your business, discuss your concerns with an experienced family law attorney. They will either be able to explain your options, or recommend an accountant who can help you understand and implement the safest financial practices in your particular situation. Of course strategizing well in advance is always your best option. Put together your team of advisors which ought to include attorneys, accountants, tax advisors and business advisors. Goodness knows we have a lot of terrific professionals readily available here in Oakland County. 

Don’t involve your spouse in your business operations

Asking your spouse to help you out by keeping the books for you, or by serving in an executive capacity in some way in your business will likely backfire if you end up getting divorced. Any time a spouse can claim to have participated in the daily operations of your business during the marriage, the business itself is more likely to be seen as marital property by the court. Whether it’s a business that you yourself own, or maybe it’s a family owned business that you are now involved in, your assets might be at risk during a divorce property settlement discussion. 

Anything deemed “marital property’ by an Oakland County Family County can be divided between the divorcing spouses. And once something is recognized as marital property, refusing to share it with your spouse (or trying to hide it so that they don’t get any part of it) can have pretty disastrous results for you. In fact, you could end up losing half your business to your spouse, or worse – lose your whole business altogether!

Get top notch advice from top notch attorneys

Want to protect the small business you worked so hard to build? Of course you do. Want to make sure you’ve done everything in your power to set your efforts and investments up for future success? Without a doubt. Call The Kronzek Firm today at (248) 479-6200 and talk to one of our top rated and very experienced family law attorneys. We offer free initial consultations, and have helped countless satisfied clients over the decades to protect and defend their financial futures. We can help you too.