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Divorcing when you own a business together

Friday, 28 October 2016

office-170639_1280The breakdown of a marriage is often difficult enough and there are lots of decisions to make, but throwing a business into the mix can make things all the more difficult, especially when you started the company together or share an interest in it.

According to figures from the Institute of Family Business, there are more than 3 million family businesses that currently operate in the UK. Family businesses tend to operate on mutual trust and all too often overlook the importance of putting pre-emptive measures in place like pre-nuptial agreements and post-nuptial agreements. These types of measures can help to prevent putting your business at risk further down the line if problems arise and a marriage breaks down.

What to consider if you own a business together and want to get divorced

Ending a marriage requires support, not only from your friends and family but also in a legal sense. Every divorce is different and so is every business which means that you will require a tailored response to get the best outcome. You should seek advice from a family law professional who will be able to advise you on the best course of action. What that looks like depends on your situation but it could be selling your half of the business to your former partner, transferring non-business related assets to offset your claim on the business, taking payment in instalments, taking a percentage of the value of the business if it is sold in the future or even continuing to work together.

Valuing the business

For a financial settlement to be made the business must first be valued by an independent expert such as an accountant, normally using either an asset-based method, earnings-based method or a dividends based method. Once a valuation has been determined it is then up to the partner who wishes to retain the company to raise funds to meet the split of the valuation of the businesses.

Whether the business will even be taken into account will of course depend on whether or not you have entered into prenuptial or postnuptial agreements which can effectively ring fence business assets from any divorce claims. It can also be effected by the amount of shares you own in the business, partnership terms and articles of association, the length of the marriage, whether the business was inherited or not and finally your needs.

If you are considering a divorce and run a business with your partner then you should seek advice from our family law team. It’s important to know that if you decide to put off your divorce but still separate from your partner then you risk having to pay more for your business. The court may decide to acknowledge a rise in value between the date of separation and the date of divorce.

To arrange an initial consultation with a solicitor experienced in family law issues, please contact us or call us on 0207 7611 4848.

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