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Divorce when you own a business – what do you need to consider?

Coming to the decision that your marriage has come to an end is not an easy time and there will inevitably be stressful periods, navigating an unfamiliar process, with various factors to consider.
divorce and business

Add owning a business into the mix and you’re facing an extra layer of uncertainty. 

Many couples will find that the most valuable asset they own is their business. All assets and interests such as the home, savings, investments and pensions can be shared – a business is no different.

In most cases, businesses and their value are included within the assets to be shared within the divorce settlement, even if one spouse has never been involved in the business.

However, whilst the value of the business will be taken into account this does not necessarily mean a spouse will receive a direct interest – each case is very different.

How do I establish a fair financial settlement?
The first step is to value the business. When an initial agreement cannot be made between parties, it is advisable for an expert (most likely a qualified accountant) to be instructed. They will value the business to determine the income it can provide and the extent to which it can be used to assist with funding a settlement.

Is the valuation considered differently if I’m a sole trader?
If you are a sole trader, the valuation will be considered differently than if you are a shareholder in a limited company.  As a sole trader, you own and control the business assets, but you are also personally liable for any debts. The income and profitability are the most important figures, although business assets, such as premises or vehicles, will also be taken into account in the valuation figure.

If you are involved in a partnership, then there would usually be a partnership agreement in place, but it could also be an informal partnership, with no written agreement. If it is not a partnership between you and your spouse and there are other partners involved in the business, then valuing it will be more complicated and expert help would be advised.

Is it worthwhile considering future proofing and protecting my business?
Yes, you may even enter into a postnuptial agreement which can ringfence business assets and may help limit bad feeling in the future! It’s advisable to keep the business separate to the household finances as this can help on a practical basis. You could also sacrifice other assets as part of the overall divorce settlement – otherwise known as offsetting and it’s beneficial to a spouse wanting to retain control of their business or business interest.

Will I have to sell my business if I divorce?
It’s pretty rare for a business to be sold as part of a divorce. Often, businesses are one of the main sources of income for a family and it would not be the best option to sell and lose the income it provides. All assets will need to be considered and the aim is to reach an agreement as to who has what, creating a settlement that is fair and meets the needs of both parties.

Is my husband or wife entitled to half my business if we divorce?
There is no automatic guarantee to an equal split share of a business and there could be various reasons why your spouse may not be entitled to half of your business or business interest upon divorce.

One of the important things to remember is that no two cases and businesses are the same, so seeking early advice is key to ensure that you reach the best outcome.

Contact our specialist team for further guidance on 01792 468684 or email

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