Will my business be part of a divorce settlement?
In short, yes. In the majority of cases, the business and its value are included within the assets which the Court will consider during a divorce settlement. In England and Wales, all assets whether they are in the sole name of one party are capable of being shared or split during a divorce. This includes businesses, property, savings, investments (in the UK or abroad) and pensions.
There are inevitably some exceptions which depend on the facts of each particular case; however, a business and its assets will often result in the value of the business being shared or split, especially after a lengthy marriage or one whether there are young children of the family.
Is my spouse entitled to half of my business if we get divorced?
Whilst it is possible, there is no guarantee of a 50:50 division of a business. There could be various reasons as to why a spouse may or may not be entitled to a share in a business upon divorce which depends on the particular facts of each case.
Does it matter what type of business?
No. For the purpose of divorce proceedings, any business whether it is a sole trader, partnership, limited company can be considered as an asset which the Court will consider sharing between the divorcing parties.
How does the business get valued?
Usually, an independent forensic account is jointly instructed to provide a valuation for the divorce proceedings.
The accountant will consider several factors such as the business assets, profit and loss, business accounts and the way it has been set up and run. The accountants will usually consider tax implications.
How will the business be shared?
This depends on a variety of factors including other assets of the marriage. Even though the business will be valued, it will not necessarily result in a spouse receiving a direct interest in the business. Sometimes, the value of the business can be offset against another asset if this is possible.
Can I protect my business if i am thinking of getting divorced?
Whilst you cannot keep your business and its assets out of a divorce settlement, there are ways of protecting the business which include:
- Entering into a post-nuptial or separation agreement to keep the business assets out of a divorce settlement.
- Keeping the business totally separate to other household finances.
- Sacrifice or “offset” the business and its assets against other marital assets, such as savings, investments, pensions, or the family home.
Will I have to sell my business if I get divorced?
The court has wide ranging powers when deciding financial settlement from divorce proceedings and it is unusual for a business to have to be sold as part of a divorce. Whenever possible, the Court’s foremost position is to keep a business with its owner.
Remember nothing in this article is intended to constitute legal advice and your position and the options open to you will vary depending on your specific circumstances. To discuss your business any aspect of financial settlement on divorce proceedings, contact our Family Law department who have expertise and knowledge to assist.