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Resolving the financial matters of any divorce or separation can be challenging, but those challenges are often amplified if you or your spouse or partner is involved in a business.

There may be complex corporate structures to untangle, business models that transcend family generations, partnership agreements to understand, or one of you may be an outright owner of a business. It may even be that you are business partners with your spouse or partner, or that they have historically been a joint owner for tax purposes.

Our solicitors specialise in high net worth divorces and those involving businesses and always follow a practical and balanced approach to negotiations, to minimise conflict and work towards an acceptable outcome for both sides. We aim to achieve amicable solutions efficiently without going to court, but if a dispute arises, we have vast experience and the knowledge to deal with court effectively.

Business division in divorce

In most cases, businesses are included within the assets to be divided in a divorce settlement. This is regardless of whether you are a sole trader, limited company or have shares in a business.

There are exceptions to the rule of whether the business is considered an asset, as it is dependent on the circumstances, so it is important to take specialist advice from our expert family lawyers. However, typically, if there has been a long marriage, or if there are children involved, the value of the business will likely be included in the assessment of finances on divorce.

The split of the business again depends on the circumstances, the length of marriage, the standard of lifestyle you both lived, each party’s contributions to the business, and the needs of any children involved. This is to ensure a fair and equitable division of assets.

Valuing business assets in a divorce, however, can be especially challenging. A business valuation in divorce settlements can often be offset against other assets, such as the family home, to minimise the risk of needing to sell the business.

Business valuation in divorce

In divorce proceedings, owning a company or shares is often one of the highest value assets and is therefore a leading cause of disputes. Depending on the nature and complexity of the business, it may be difficult and therefore expensive to obtain a formal valuation.

We recommend obtaining legal advice prior to any process of valuing a business. This ensures that the valuation is done in the most appropriate manner, avoiding wasting time, money and effort on methods that may later offer little assistance or, worse still, may be detrimental by giving an unrealistic expectation of the value to one party.

We have the experience and expertise to guide you through the issues that should be taken into consideration in exploring valuations and can ensure matters progress in a suitable and cost-effective manner.

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Business assets in divorce FAQs

Will I lose my business in a divorce?

There are often a range of options available for dealing with businesses during a divorce. One option is to leave one person as the sole business owner and compensate the other by way of the distribution of other assets or ongoing maintenance to effectively pay them out. Other options include splitting the business into separate entities, one party continuing the business but sharing income, or continuing the business as a joint enterprise in joint names.

Selling a business or ceasing to trade is rare. Separating couples have their own unique circumstances that will dictate what is the best approach for them and their family.

Other key considerations will include any tax consequences and the ability to extract cash from the business while maintaining commercial viability.

I had my business before I married, does that make a difference?

If you had your business before you were married, or even before you met, then that could make a significant difference. In divorce proceedings, the court aims to establish a position of equality in division of the matrimonial assets. Assets acquired prior to marriage are not usually considered matrimonial assets, so could potentially be ring-fenced. However, this is a complex assessment when business assets are involved, particularly if there have been significant endeavours within the business during the marriage. The wider circumstances of the marriage and what other finances are available will also be relevant in determining whether your spouse may be entitled to part of the value of the business.

Is a limited company a marital asset?

Yes, a limited company or more accurately the shares owned by you or your spouse can be considered a marital asset. However, if the company was owned before the marriage (or civil partnership), it may be possible to argue that it should not be considered a marital asset.

During the divorce or dissolution proceedings, the financial assets of both parties must be considered and divided. This factors in both parties needs, the children's needs, any financial obligations and the standard of living before the separation. This results in an arrangement that is fair to both parties.

Therefore, business assets, such as shares in a limited company or assets owned as a sole trader, may be considered, especially if the company has generated income and helped maintain the standard of living.

How is the value of the business determined?

Firstly, the business structure is examined to determine who legally owns the business assets and liabilities and what interest, if any, shareholders or owners have. Following that, the tangible and intangible assets will be looked at, this includes vehicles, premises, and intellectual property.

The value of the business is usually determined by one or more of the following approaches:

  • Income of the business - This values the business based on what income the business has, as well as expenses covered by the business. This form of valuation is often used in skill-based businesses, such as marketing agencies, where there are fewer assets, but considerable income.
  • Business assets - This values the business based on the asset it has. This form of valuation is often used in investment businesses such as a business that buys, renovates and lets properties or in manufacturing businesses where there is a considerable amount of assets.
  • Market rate - This values the business based on comparisons to other similar businesses that may have been sold recently.

Our expert lawyers can help you understand the complexities of business valuations and discuss with you the significance of taking the right approach.​​​​

How do I dispute the business valuation?

It is not uncommon for business valuations to be a cause for disputes in divorce proceedings, especially if only one person has obtained the valuation or it has come from someone who is closely linked to the business.

In some cases, one party may be sceptical about a low business valuation which does not correlate to the perceived standard of living, or they may have concerns that there are attempts to downplay its value, by delaying trade deals or hiding business assets in offshore accounts. Equally, it may be that there are concerns about a valuation being too high with one party having specific knowledge about a risk or concern for the business.  

Whether your former partner is not cooperating with the valuation of a business, you do not have disclosure relating to the business or you just feel the valuation is wrong, we can help guide you.

Can I sell my business during a divorce?

If you are going through a divorce, you can still sell your business. If the business is owned by both yourself and your former partner, then you will need their consent to sell it.

If you own the business as a sole business owner, going through a divorce has no direct impact on the actions you can make regarding your business. However, if you sell the business, the profit you make from selling the business may be considered as a matrimonial asset, and therefore your former partner may be entitled to some of it. There is also a risk that questions will be raised about the value obtained for the business, whether it was the best financial decision and the reasons behind the sale. In certain circumstances it may also be possible for your former partner to attempt to block or delay the sale until the divorce is resolved.

What are the tax implications of dividing business assets during a divorce?

Tax implications when dividing business assets in a divorce are often a big factor and can include:

●      Capital gains tax - This may be applicable if the business assets are transferred or sold.

●      Stamp duty - This may be applicable on the transfer or selling of a property.

●      Income tax – Considering who is liable for paying tax on income received prior to any changes with the business ownership structure on divorce.

To ensure tax implications are thoroughly considered and then managed, it is advised to seek specialised advice. At Boyes Turner, we work closely with specialist accountants and financial advisors to ensure you have the support you need. We also have specialised legal teams that can offer tailored and effective advice to help protect your wealth for you and your family.​​​​​​

What do I do if my business partner is going through a divorce?

If your business partner is going through a divorce, or civil partnership dissolution, it is unlikely that a divorce court would make a decision about a company they are involved in, that negatively affected a third party. However, the court does have the ability to make orders that can impact the business.

There are possible ways to ringfence parts of the company to protect it from the effect of financial claims, such as putting in place:

●      A shareholders agreement - this sets out the method of valuation and place limit such as the transfer of shares,

●      A partnership agreement - this sets out the provisions in the event of the business partners relationships breaks down.

●      Nuptial agreements – a pre-nuptial or post-nuptial agreement entered into by each business owner with their respective spouse could help to protect it from any later divorce.

Often it may be too late to take some of these steps once a divorce is underway, so more and more business owners are considering these steps during the formation of the business or as part of their corporate governance.​​​​​​

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Why use our divorce solicitors?

  • We have vast experience in assisting our clients in navigating issues involving businesses in divorce, by balancing the legal, practical and commercial realities. Often, it will be necessary to take a multidisciplinary approach, involving other experts including in accountants, corporate lawyers, and property solicitors.

  • We pride ourselves on our outstanding level of service, and work in conjunction with other specialist teams and external contacts, to allow us to offer a service that considers all angles to achieve the best outcomes for you and your family.

  • Boyes Turner is ranked as a leading law firm by the legal directories, Chambers UK, and The Legal 500 and has been for many years. When our clients require extra specialist guidance, we have other highly rated corporate, property, dispute resolution solicitors too.

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