Protecting Your Family-Owned Business in a Michigan Divorce

MI divorce attorney Jim Hubbert gives tips on protecting your family-owned business in a Michigan divorce.

Starting a small business to provide for one’s family, or carrying on an existing family business, is a source of pride and labor of love for many Michiganders. Unfortunately, a divorce can threaten the fruits of a lifetime of hard work in the family business.

Of course, no one plans or hopes to get divorced. But considering the prevalence of divorce in the United States and in Michigan, every small business owner should view divorce as a contingency to be planned for. This is especially true if the spouses are co-founders of the business; failure to plan for contingencies may land the couple not just in divorce court, but in bankruptcy court as well.

Here are some time-tested suggestions for protecting your family business and resources in a Michigan divorce.

MI divorce attorney Jim Hubbert gives tips on protecting your family-owned business in a Michigan divorce.

Planning for Divorce Doesn’t Mean Planning to Divorce.

Many Michigan couples are hesitant to consider prenuptial or postnuptial agreements, on the grounds that such agreements are planning for the marriage to fail. In fact, the opposite may be true: discussing expectations and getting on the same financial page can relieve stress and prevent disagreements in a marriage, helping it to survive. However, if you do decide to divorce, you will be very glad that you made plans for the division of any existing or prospective business when heads were clear and not clouded by the emotion of divorce.

Put the Survival of the Business First.

Your family business is the goose that lays the golden egg: it provides the resources that supports your family. If spouses are playing a figurative tug-of-war with the goose, it won’t be long before it collapses and can’t produce anything at all. Energy diverted to fighting over the business is not available for promoting the business’s success. When having a prenup, postnup, shareholder or buy-sell agreement drafted, bear in mind that the most important thing is the ability of the business to survive.

Agree on a Valuation Expert.

Even if you are at the point of divorce, and don’t have an existing agreement on the disposition of the family business, all is not lost. At this point, each party often mistrusts the other and wants to hire their own expert to value the family business. This process can be wildly expensive, may be duplicative, and may lead to protracted and costly litigation if the experts’ numbers are far apart. Put your energies into agreeing on one reliable expert and agree to accept his or her valuation.

Don’t Split the Baby.

Although it might seem like an easy and equitable solution, awarding each spouse half of the business is usually a recipe for trouble. A couple that has just emerged from a contentious divorce is unlikely to be able to work together smoothly, and that can’t help but affect the business. In addition, it can be hard for the parties to move on successfully from the divorce when they must still see each other daily at work. If you and your soon-to-be-ex do decide to try to operate the family business together post-divorce, at the very least have a buy-sell agreement prepared so that one of you can buy the other out if the working situation becomes untenable.

If you are a business owner considering a divorce in Oakland County, Wayne County, Macomb County, or anywhere in Southeast Michigan, or if you are married and contemplating starting a business you should speak to an experienced Michigan divorce attorney who can advise you regarding your particular situation. Contact our Bloomfield Hills office to schedule a consultation with Jim Hubbert, so that you can protect your business and your family’s future.