Considerations For Business Owners Following A Divorce

December 24, 2018
Chris Coulter

Article written by Chris Coulter

You’re on the other side of your marriage breakdown, your separation agreement has been finalized and your divorce has been issued. As a business owner, what should you be thinking about now to move beyond this period of your life and get your business back on track?

Here are some excellent places to start:


Moving On

Going through a divorce can be an emotionally draining period of your life and without a doubt, it has probably taken a toll on your work ethic and your business. Hopefully, you have some people within your organization that have been able to step up and pick up some of the pieces that you may have dropped along the way.

As someone who has been there, it’s time to move on, embrace that it’s over, and although it may have been an expensive settlement, be proud that you still have your business. Your company represents a tremendous vehicle which can take your career to new heights with the right plan and proper focus. The sooner you’re able to move beyond the cost of the settlement, the greater your ability to be able to build your business.

Financial Considerations

There are the profits that your business makes, and then there’s the cost of getting that money into your hands tax-efficiently. 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.

By undertaking other tax-efficient measures, like setting up a Personal Pension Plan, starting a Corporate Insured Retirement Plan, starting a Retirement Compensation arrangement, or any number of other strategies that will achieve this, you’re not only building your financial nest egg, but you’re doing it tax-efficiently, and in some cases, creditor protecting yourself in the process. For more wealth-building strategy ideas, see this article.

Buy-Sell Arrangement within a Shareholder Agreement

Whether you’re the sole stakeholder or whether you have a number of shareholders within the company, ensure you address what happens in the event that one of the shareholders 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

Many of us have been told about the importance of setting up a personal will yet only about 50% of adults actually have a will. For business owners, setting up a business will can serve the same purpose as a personal will but as it relates to the direction of the company in the event of a shareholder’s death. If a business will does not exist, and the assets of a business are not laid out in great detail in that of 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. What happens if there is no shareholder agreement because 100% of the shares are controlled by one individual or holding company? This is where a business will can be very beneficial to the survival of a business and ensure that the company’s assets get into the right hands.

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 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. 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, which in most cases prevents someone 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.