Business and divorce
Divorce is difficult at the best of times; however, if you own a business it can add an extra complication. Company structures and the ability to extract cash from the business can make it difficult to assign assets to a spouse, while maintaining the company’s integrity, so an understanding of company and related tax law is essential to coming to an outcome which is both practical and tax efficient. Our expert divorce lawyers can help you come to the best possible agreement.
Divorce business assets
A divorce that involves a company will need a specialist solicitor with business expertise. Sometimes there are complicated company structures, which can make distributing assets to settle a divorce complex and challenging. It’s important to protect the integrity of the company as far as possible, so the trade is not compromised, while still managing the spouse’s expectations.
You may have started the business or been running it for some time and believe that what you’ve put in should remain entirely yours. If your spouse was running the business, you may feel your support entitles you to a share. It can be difficult to reconcile both sides of the argument.
Valuing a business for divorce
Divorce, when you own a business together, can add an extra headache. In England and Wales, any business interests and values contained in them can be seen as ‘matrimonial assets’ to be divided up in a divorce , this is sometimes the case even if the business was set up before the marriage began, particularly in a long marriage. If you own a business together, or it is otherwise considered a marital asset, the business will most likely be valued for the financial settlement. When valuing a business for divorce, the following is taken into consideration:
- The assets the business owns (e.g. stock, property)
- Its earnings, this includes the profits that have been made and are expected to be made in the future
- The structure and ownership of the business (e.g. if it’s a partnership, sole trader or a limited company)
- Any shareholder agreements
- Whether there are any third party interests
- Liabilities including tax
- Liquidity and the possibility of capital extraction
Depending on the complexity of the businesses, it can be very costly to value the business. Before you begin the process of valuing the business, it is recommended to get legal advice.
What happens to business assets in divorce?
What happens to business assets in divorce depends on many factors, including whether the business is shared between the divorcing couple or if only one spouse owns it. In England and Wales, any business interests are generally considered a matrimonial asset if set up or developed within the marriage.
Depending on the circumstances, the courts may leave the business owner with the business and compensate the other spouse with a larger share of other assets, a higher maintenance payment, or the couple may share the income or divide the shares between them. Sometimes the business may continue in joint names for joint benefit.
What happens to a family business in divorce?
If you own a family business with your parents, siblings or another relative, your share is likely to be considered as a shared asset. Any share of the family business not owned by you or your spouse will not be considered as a marital asset. How a business is divided will largely depend on how the business is structured and the circumstances of your case. A minority discount may apply to the valuation of your share.
How we can help you?
As leaders in divorce and business law, with expert collaborative lawyers and mediators, we can find practical solutions that are acceptable to both parties, usually without going to court.
We are well qualified to advise you in this area, as a South East firm that is recognised as legal experts for divorce and business law. We can also bring in our colleagues from other parts of the firm, such as our tax experts, who can advise on the most tax-efficient way of transferring assets. As many of our clients are company directors and business owners, we have considerable relevant experience.