Dealing with businesses in divorce

Knowing how to divide any of your assets during a divorce can be confusing. If you're business owners, it can become even more complicated.

But it's possible for businesses, and any business assets in divorce proceedings, to be handled smoothly and successfully. Reaching a point where everything is resolved can be complex, but getting expert legal advice is the first step towards a fair outcome.

Our divorce lawyers are specialists, highly skilled in handling difficult divorce and family business cases with empathy. We'll take the time to understand your concerns for your family and your business, then use our extensive experience and practical understanding to guide you to the best possible outcome.

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What happens to a business in a divorce?

If you're a business owner facing a divorce, you may be worried about how your personal situation will impact on daily operations and performance, and whether you'll still have a business at the end of things.

Your divorce lawyer will explain the process in detail and take you through how business assets in divorce proceedings are handled. All assets owned by you and your ex are taken into account and can potentially be divided by the court during a divorce. This includes businesses or any business interests, as well as other assets like your family home, savings or pensions.

The court can order a shareholder to sell or transfer their shareholding in a business and a business owner can be ordered to sell or transfer business assets that they own personally. Although this is rare and would be a last resort, it's vital that you take early advice to ensure you understand the legal position, helping you to make the best decisions.

Dealing with a business in a divorce

The first thing to remember is that all your family's assets (including property, money, investments and pensions) are taken into account in a fair financial settlement. Everything must be disclosed upfront but, depending on the circumstances, it may be possible to ring-fence or preserve assets such as businesses.

Assets are classified as either matrimonial assets or non-matrimonial assets. Matrimonial assets are assets that have been acquired during a marriage or civil partnership. These include jointly owned property, investments and family businesses. Non-matrimonial assets are assets that were acquired before the marriage or after separation. Examples can include inheritances, property bought before the marriage and businesses set up before the marriage.

In England and Wales, the starting point is that matrimonial assets should be shared equally. However, to achieve a fair financial settlement , sometimes the assets are not shared equally, for example:

• If one of you clearly has a greater financial need than the other
• If one of you can show you made a significant contribution to the matrimonial assets

Sometimes it's possible to get a fair settlement with just the matrimonial assets. Sometimes it isn't possible though, and then the non-matrimonial assets have to be included and divided up. 

How your business or company (or your ex's business or company) is treated in your divorce will be specific to your circumstances.  If the business was built up during the marriage, the most likely starting point will be that you each share the value of the business 50:50 (even if only one of you worked for the business). 

Although the court has the power to order a sale or transfer of a business owner’s shareholding or other business assets owned by them personally, this is usually a last resort.

When you seek legal advice, your divorce lawyer will look at your circumstances, advise you and take you through what the court may decide to do.

If you have questions about your divorce and how to proceed in the best interests of your business, contact our family lawyers and we'll help you.

Points to note about dealing with a business on divorce

Dealing with a business as part of a divorce can be tricky. While we'll talk you through your options, there are some key points to be aware of:

• The value of a business can be "offset" against other matrimonial assets.
• Business owners can take steps before and after marriage to protect assets from divorce.
• The courts in England and Wales have jurisdiction to make an order against a foreign business.
• Commercial property owned by a company pension scheme – for example, a small self-administered scheme (SSAS) – can be divided between spouses by way of a pension share.

Usually, a formal business valuation will be needed. A single joint expert (SJE) will be instructed to act for both parties. There are different ways a business can be valued. Some of the most common valuations are on a net asset basis or based on future income stream. An SJE may also be asked to advise on the sustainable future income of the business owner, tax issues, and whether there is any liquidity within the business to fund a financial settlement on divorce.

How can we advise you on dividing a business in a divorce?

Whether you want to know how a business is divided in a divorce settlement or if there's a chance you'll have to sell your company, we can help. Our expert divorce law team will listen to your concerns and then talk you through the complexities of your case to give you the answers you need.

We'll work closely with you and your family, blending our technical knowledge of the law and our understanding of how divorce can impact on businesses to give you clear, practical guidance.