Dividing Business Interests After a Divorce

Sorting out the family business after a divorce can be messy and complicated; especially if the relationship between you and your former partner has debilitated to the extent that you’re no longer on speaking terms. Due to this, dividing your business interests can be tough if you’re going through a divorce. Here’s where to start and what your options are.

Financial Settlements and Your Business

According to the law, any business interest and the value it contains is classed as a ‘matrimonial asset’ that needs to be divided in the case of divorce or dissolution in England, Wales or Northern Ireland.

In Scotland, the rules are different and a business is only classified as ‘matrimonial property’ if they were set up or acquired after you were married (or became civil partners). If the business pre-dates this, then any increase of the value while you were married or civil partners can be counted as ‘matrimonial property’.

The rules surrounding this are both complicated and, depending on individual circumstances, can be unclear. So it’s worth considering expert advice from specialists like Withers.

How is my Business Valued?

To ensure both parties are granted an equal settlement, the business must be valued (this counts for if you own it outright or have a significant shareholding).

If you both own a share then other of you can instruct a valuation. If it’s only owned by one party, then that party must ask for the valuation. If the business is privately owned, then the valuation process may be lengthy as it will depend on:

– How the business is structured: are you a sole trader, in a partnership with someone outside the marriage, or a limited company?
– How much doe the company earn and what future profits are expected?
– Does it own any additional assets e.g. property or stocks?

Again, before valuing the business, it’s worth consulting legal advice, as the process can be both lengthy and expensive.

How Do the Courts View This?

Again, each situation is taken on a case by case basis considering the individual circumstances. However, as a general rule, the courts tend to leave the business with the registered business owner and compensate the other party with a larger share of assets. In the majority of cases, this is something that the couple also wants, making the process simple.

However, they can be flexible, dividing income or shares instead.

To conclude, splitting a business as part of a divorce is both lengthy and expensive. The courts are flexible with their options, but you should always consult legal advice on the valuation and your options before you begin.

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