What Divorce Means
For Your Business
When getting married you may not consider that your business may form part of the matrimonial pot
Businesses form part of the assets to be shared on divorce and are a central part of financial remedy proceedings. When there is the divorce, the family courts will deal with the issues of the business whether it is trading of the firm a company or a partnership.
The business itself comes under intense scrutiny. The questions that will come up will include:
• How much is it worth?
• How much income can you produce?
• Should it be producing more?
The business itself may well be valued by either the company accountant or an independent forensics accountant. The value of the business can become a very influential asset in the division of matrimonial assets.
You may have your own view about your business and your future plans, but often you will find that the judges will look at liquidity within the business and the possibility of that being paid out to meet the housing needs of the other party. It is important that you have the right to legal advice from the outset. It’s important that you work together with your solicitor to get a firm grip on this aspect of your case. It will not be possible to step away from this. It is better to be open and up front from the outset, rather than reacting in court to the demands of your spouse.
Certain information will help your solicitor for example:
• How was the business formed?
• When was the business formed?
• How is the business structured?
• How is the business owned?
• Who else is involved/owns the business?
• What role did the other parties have, what role do you play in the business, or the shareholdings to be considered?
How can I protect my business?
If you are looking at protecting your business before the divorce arises then you need to take very careful and measured steps. If you are seen to be moving assets or shareholdings, simply to avoid a claim on divorce, then this will damage your case considerably. The courts also have the power to set aside any transactions that are specifically designed to defeat your spouse’s claim.
Something that you need to bear in mind is that a pre-nuptial agreement or post-nuptial agreement can be helpful in limiting claims against a business. This requires planning ahead at the time you get married or subsequently during the marriage, which can often feel very unromantic. Try not to mix your business assets with your private assets unless absolutely necessary and where possible try not to involve your spouse in the business, although it can often be tempting for tax purposes.
If the business has a shared ownership with somebody outside of the divorce, then this can be helpful. If not, and it is only owned by one spouse, then it will be treated like any other asset, to be divided or shared unless there is a good reason not to.