How Can You Protect Your Business During a Contentious Divorce?

When you got married, you didn’t expect to start a successful business or go through a difficult divorce. Now, you aren’t just facing the end of your marriage; you are fighting to preserve your livelihood, your professional reputation, and the future of an entity you worked hard to build. The fear of losing control or value in your company is valid, especially in a high-conflict separation. To protect your business interests in divorce, consider these critical actions:

• Separating personal and business records
• Preparing for a professional business valuation
• Preventing operational disruption
• Utilizing court protections like temporary orders

At Sabuco Beck, P.C., our lawyers have over 90 years of combined experience helping clients with complicated family law cases. We understand that protecting your business requires a strategic, proactive approach, and our team is here to provide effective guidance at every step.

Why Is It Important to Separate Personal and Business Records?

One of the most common complications in a divorce involving a business is “commingling assets.” This occurs when personal finances are mixed with business finances.

If you have commingled assets, a court is more likely to view most or all of the business as marital property, making it subject to division. To protect your company, you must establish clear boundaries immediately.

• Stop all personal use of business funds: Ensure every transaction is strictly for business purposes.
• Open separate accounts: If you haven’t already, distinguish your business banking from your personal accounts.
• Pay yourself a salary: Rigorous documentation of your income helps determine business expenses versus household contributions.

How Can You Prepare for a Business Valuation?

In Illinois, as in many states, the value of a business created, acquired, or appreciated during the marriage is often subject to equitable distribution. For a fair outcome, you need an accurate valuation of the business itself and how much of it is considered marital property. To facilitate this, start gathering the following documents:

• Tax returns (business and personal) for the last 3-5 years.
• Balance sheets and cash flow statements.
• Lists of assets and debts.
• Records of each spouse’s efforts and contributions.

A valuation can also help distinguish between “enterprise goodwill” (value inherent to the business) and “personal goodwill” (value tied specifically to you). In many cases, personal goodwill may not be considered a marital asset, reducing the overall marital value of the business subject to division.

What Are Ways to Prevent Operational Disruption?

A contentious divorce can be a major distraction from the regular workings of life, but your business should not need to suffer as well. If the value of the company drops due to neglect during the proceedings, it can complicate the settlement and hurt your long-term revenue. Consider taking actions like:

• Implementing Non-Disclosure Agreements (NDAs): If your spouse has had access to sensitive data, an NDA can prevent them from sharing trade secrets or client lists.
• Delegating where possible: If the emotional toll of court dates is affecting your focus, lean on trusted managers to handle day-to-day operations.
• Maintaining professionalism: Keep divorce discussions out of the workplace to preserve employee morale and client confidence.

What Court Protections Are Available for Businesses in Divorce?

If you fear your spouse might try to harm the business by draining accounts, selling assets, or damaging your reputation, you can seek legal protection. Courts can issue orders to maintain the “status quo” until the divorce is finalized. For instance, a Temporary Restraining Order can be used to freeze specific business assets or prevent a spouse from entering the business premises, or a court can issue an injunction prohibiting a spouse from interfering with business operations. A lawyer can help you determine what court orders may be necessary for your situation.

Proactively Protecting Your Professional Future

Your business represents both years of hard work and security for your future. Even in a contentious divorce, you can minimize the impact of your divorce on your professional life by keeping meticulous records and securing the right legal orders. A skilled lawyer can be your essential advocate to protect your business during the legal process.

If you are a business owner in Will, Grundy, Kendall, or LaSalle County facing a divorce, contact Sabuco Beck, P.C. today. Let our experienced team help you protect what you have built.