What happens to a family business in divorce?

You started out on your own but, through hard work and determination, you’ve built your business from a side-project into a thriving company. The success now makes all those long days and sleepless nights feel worthwhile. The last thing you want to think about now is splitting your business up or giving part of it away, but you will need to know what happens to a family business in divorce. 

When a marriage breaks down, one of the arrangements that can be difficult to resolve is separating the spouses’ financial lives into two households. You need to try and ensure that the resources available to the family are split fairly between the parties bearing in mind the circumstances of the marriage. Where one of the assets is a family business or company, this can be particularly difficult to manage. The best thing to do will be to speak to a solicitor who specialises in family law and has experience of dealing with businesses in family law proceedings. Below are some of the points that you might want to consider and the answers to some frequently asked questions.

What happens to my business when I divorce?

To separate your finances in a divorce, you need to look at what resources are available to the marriage. This means looking at all of the assets and resources available to you and your spouse, even where those assets have been built up by just one of you without the direct involvement of the other. A business, or a share in a business, is just one of the types of asset that can be considered in the divorce to meet you and your spouse’s needs after divorce.

A business is not always divided on divorce. This depends in part on whether the business has a value itself or whether it just produces income for you. If the business owns property, or has a large cash balance in the bank, then it might have a cash value to be managed in your divorce. If the business is just a way to get your income then it might not make sense to look at it as an asset to deal with in your divorce.

This does not necessarily mean that the business will automatically be part of the assets to be split between you and your spouse on divorce. How this works will be specific to each individual set of circumstances. 

How to value a business in a divorce

It will be necessary to work out the value of a business whether you are splitting the ownership of the business or one of you is keeping the business and balancing that against other assets. How to value a business very much depends on the type and size of the business. It is likely that you will need advice from an expert to value a business. Our specialist family lawyers can advise you on how this will work in your case and can ensure you ask the right questions to get the right information for your case. It is very important to have an accurate and reliable valuation of a business in a divorce. This will make sure that the arrangement you reach for separating your finances, whether by agreement or through court, is one that reflects the reality of your circumstances. Without a reliable valuation, there is a risk that any settlement you reach could be undone or set aside if it later turns out that the value was significantly different from what you thought. 

Is my husband or wife entitled to half my business in a divorce?

So, what happens to a family business in divorce? The business as part of your marital assets will be part of the calculation of your separation of finances, but there is no set rule that your business should be split in half. What is right for you will depend on what resources you and your spouse have. You will need to do what is fair so that you and your spouse are both able to meet your needs and the needs of your children. 

How is a business split on divorce? 

There are a number of ways for a business to be dealt with. The shares one of you hold in a business could be divided up and split between a divorcing couple. You could possibly sell a business, or part of a business, and share the proceeds of sale. Alternatively, if you have other assets then one of you could keep the business intact and the other could receive more of the other assets to balance this out. If you want to keep your business, you could raise some money to buy out your former spouse’s interest in the business. If that isn’t possible, you could transfer a share in a solely-owned business to your former spouse so they can benefit from the income. You could then buy them out over time. Again, what is appropriate will depend on your circumstances. You should speak to a specialist family lawyer to work out how your business might fit in with your particular case.

How do I protect my business in a divorce?

If you own your business prior to getting marriage then you can think about entering into a pre-nuptial agreement when you get married. This can set out how your business should be protected if you get divorced. A pre-nuptial agreement is not legally binding but can be very persuasive as to how your assets should be dealt with on a divorce. You can find out more about pre-nuptial agreements here [link].

If you are already going through a divorce then you can still think about protecting your business. You could look at buying out your spouse’s interest in the business or balancing it out against other money or assets in the divorce.

How Moore Barlow can help

We know your business is important to you and you want to protect it. Our specialist family lawyers can advise you on how to get to a settlement that works for you and your business.

Get in touch with Moore Barlow now.