Business Owner Considerations Post-Divorce

November 14, 2022
Chris Coulter

Article written by Chris Coulter

Being a business owner is no easy feat. Combined with a divorce, it may even feel impossible. But this is no time to throw in the towel. The following article discusses what you should be thinking about in order to move forward and get your business back on track.

business owner

Moving On:

Going through a divorce can be emotionally draining. Therefore, it is natural that it might take a toll on your business. If you are lucky, you may have people within your organization that you can rely on to pick up some of the pieces you dropped along the way. While a comforting thought, however, this is your business, not theirs. Eventually, you need to take charge once more.

As someone who has been there, I understand that throwing yourself back into work may not come easily. However, once you do, it will make a world of difference. Remember how much effort it took to start your business in the first place? Don't let the breakdown of your marriage breakdown all your hard work. It is time to embrace your new reality. The sooner you can put your divorce behind you, the sooner you will be able to build up your business and watch it thrive.

Business Owner Financial Considerations:

During a divorce, there are often many changes to your finances. As a business owner, however, you need to consider both your personal and professional funds. Don't let the aftermath of your divorce distract you from your bottom line! After your divorce is a great time to consider tax-efficient financial measures for your business.

As you know, there are your business profits, and then there's the cost getting that money into your hands. Tax-efficiently, of course. Many business owners take a salary, then either bonus or dividend additional money out to themselves. The problem with this is these strategies attract a  higher marginal tax rate.

business owner

By undertaking other tax-efficient measures, you're not only building your financial nest egg, but you're doing it tax-efficiently. In some cases, you're even creditor protecting yourself in the process. Ways to do this might include setting up a Personal Pension Plan, starting a Corporate Insured Retirement Plan, or starting a Retirement Compensation arrangement For more wealth-building strategy ideas, see this article.

Buy-Sell Arrangement within a Shareholder Agreement:

After your own divorce, it may be a good time to address what happens in the event that one of your other shareholders (if any) goes through a divorce. A buy-sell arrangement will allow existing shareholders to buyout half of the other shareholder’s stake in the business. This prevents an ex-spouse from becoming an unwanted shareholder in the business. It also ensures the management of the business does not become compromised in the event of a shareholder’s divorce.

Setting Up a Business Will:

Post-divorce, you have experienced first hand the division of personal assets. This may now have you wondering how you can protect your business assets. One way to ensure the survival of a business and that the company's assets fall into the right hands is by drafting a business will.

business owner

A business will can serve the same purpose of a personal one; however, it relates to the direction of the company in the event of a shareholder's death. If no business will exists and the business assets are not laid out clearly in a personal will, the assets can become frozen and left up to interpretation by lawyers.

A shareholder agreement will generally address what will happen to the direction of the business and share ownership in the event of a shareholder’s death. However, when 100% of shares are controlled by one individual or holding company, no shareholder agreement will exist. This is where a business will can be very beneficial.

Business Owner Creditor Protection:

Being a business owner means taking on a lot of risk. We have expenses and salaries that need to be paid. Companies we work with may go out of business and we may not be able to collect money that is rightfully owed to us. We can also be sued by other corporations or individuals. It’s important that we minimize our business risk and protect our personal assets.

Your net worth may have taken a nosedive after your divorce to offset the valuation of your business. One way of mitigating this from happening again is to creditor protect some of your personal and business assets. We can do this by setting up a personal pension funded by our business and we can buy contracts of segregated funds either personally or through the business that can help safeguard this from happening.

business owner

Segregated funds are similar to mutual funds except they are wrapped in an insurance contract. The advantage of this is you can protect the value of these contracts but also designate a beneficiary. In most cases, this prevents someone from being able to go after these assets.


Your business has likely afforded you and your family some tremendous wealth-building opportunities. Now that your divorce is finalized, it can continue to assist you in meeting your financial goals. By utilizing advice from some great financial planning professionals who specialize in working with business owners, you can create some valuable wealth-planning strategies that will propel you and your business to the next level. Sometimes, the most important thing we can do is get out of our own way, forge into the future with enthusiasm, and release feelings of resentment from our past.