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Dividing a Business in a Divorce

Our divorce solicitors specialise in helping couples who are separating to agree on how best to split their business assets to ensure a fair outcome that meets the best interests of you and your family.

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Dividing business assets in a divorce can be a complex matter. At Forbes Solicitors, our team of specialists will work with you to achieve a fair outcome in dividing assets in divorce. We provide tailored advice and representation to ensure your interests and the division of assets in divorce are protected.

What is Dividing a Business in a Divorce?

Dividing a business in a divorce refers to the process of dividing the assets and liabilities of a business between divorcing spouses. This can be a complex process, particularly if the business is a significant asset, and may require the expertise of lawyers, accountants, and valuers to determine the value of the business and how it should be divided.

Valuing a family business during a divorce or civil partnership dissolution - whether it's owned by one or both of you - can be a complicated issue since there are a number of factors which need to be taken into account. Forbes Solicitors have a specialist team who are experts in helping divorcing couples agree on how best to split their business assets to ensure a fair outcome that meets the best interests of you and your family.

In England, Wales and Northern Ireland, any business interests - and their respective value - can usually be examined as 'matrimonial assets' which are to be divided between partners in the event of a divorce or dissolution, although that doesn't necessarily mean that the court will break up the business. In most cases - as long as it is possible - the business owner will usually be left with the business, while the other partner will be compensated with a larger share of other assets or maintenance payments. However, in some cases it is possible to split the income or shares to equally provide for both parties.

Valuing a Business during a Divorce

When it comes to valuing a business, this will normally be done if you and/or your partner own a business outright or is a significant shareholder. This valuation will be taken into account when the court decides upon a financial settlement. Either of you can arrange a valuation for shared business interests, but usually if just one person owns it (whether alone or with others) they would be the one to request a valuation.

The valuation can be a complex process as it depends upon:

  • Income
  • The standard of living that the business supports
  • Assets such as property, vehicles etc.
  • The value of personal and business pensions
  • Whether or not it is possible to extract capital sums from the business
  • Whether or not it is possible to borrow money against the business or its assets
  • The ownership structure of the company

As it is so complex, a specialist accountant will usually need to be consulted for an accurate valuation.

If you can agree with your spouse or partner on the value of the business, then the process will be more straightforward and less costly. However, many divorcing couples don't agree on the value of business assets - particularly if one partner appears to be undervaluing them. Forbes Solicitors can assist here by assessing the true worth of business assets and resolving disputes.

What happens after the Business is valued?

After a business is valued, the owner can use the valuation to make informed decisions about selling the business, seeking investment, or making changes to improve its value. the valuation may also be used for tax purposes, such as calculating capital gains tax or inheritance tax. It is important to note that the valuation is only an estimate and may not reflect the actual sale price or value of the business.

Once the business is valued, how it is treated by the court is dependent on the ownership structure. If, for instance, it is owned outright by one or both spouses, it will be treated as another marital asset. If, however, it's owned by a group of people and the divorcing spouse is a minority shareholder, it is merely the value of the shareholding that is relevant.

Dividing business assets after a divorce can be a minefield, adding to what is already a turbulent time for you.

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FAQs

What is the process for dividing business assets during a divorce?
 
 

The process for dividing business assets during a divorce involves identifying all business assets and determining their value. The court will consider factors such as the length of the marriage, each spouse's contributions to the business, and the needs of any children involved. The court may order a sale of the business or transfer of ownership to one spouse, depending on the circumstances. It is important to seek legal advice from a solicitor experienced in family law to ensure a fair and equitable division of assets.

How is the value of a business determined during a divorce?
 
 

The value of a business during a divorce is determined by assessing its assets, liabilities, and future earning potential. This is usually done by a professional valuer or accountant who will consider factors such as the business's financial statements, market conditions, and industry trends. The value of the business will then be taken into account when dividing marital assets between the divorcing parties.

Can a business be considered a marital asset even if only one spouse owns it?
 
 

Yes, a business can be considered a marital asset even if only one spouse owns it under UK law. In the event of a divorce, the court will consider all assets, including the business, and may order that it be divided or sold to ensure a fair settlement for both parties. The extent to which the business is considered a marital asset will depend on various factors, such as when it was acquired and whether both spouses contributed to its growth.

What happens if both spouses own and operate the business together?
 
 

If both spouses own and operate the business together, they will be considered as equal partners in the business. They will share the profits and losses equally, and both will have equal decision-making power. In the event of a divorce, the business will be considered as a joint asset and will be subject to division between the spouses. The division will depend on the individual circumstances of the case and the agreement reached between the parties or the court's decision.

Can a business be sold to divide the assets during a divorce?
 
 

Yes, a business can be sold to divide the assets during a divorce. The proceeds from the sale will be divided between the spouses according to their respective shares in the business. However, the court will consider various factors, such as the value of the business, the contributions of each spouse, and the needs of any children, before making a decision on how to divide the assets.

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

Dividing business assets during a divorce can have tax implications. Capital gains tax may be applicable if assets are sold or transferred, and stamp duty may be payable on the transfer of property. It is important to seek professional advice to ensure that any tax implications are properly considered and managed.

How can a business owner protect their business during a divorce?
 
 

A business owner can protect their business during a divorce by having a prenuptial or postnuptial agreement in place that clearly outlines the ownership and division of assets in the event of a divorce. They can also consider setting up a trust or transferring ownership of the business to a family member or trusted partner. It is important to seek legal advice from a solicitor who specialises in family law and business law.

What happens if one spouse wants to keep the business and buy out the other spouse's share?
 
 

If one spouse wants to keep the business and buy out the other spouse's share, they will need to negotiate a fair price for the share. If they cannot agree, a court may need to intervene and determine the value of the share. The buying spouse may need to obtain financing to pay for the share, and the transfer of ownership will need to be legally documented. The process will depend on the specific circumstances and the terms of any prenuptial or postnuptial agreement.

Can a prenuptial agreement protect a business from being divided during a divorce?
 
 

Yes, a prenuptial agreement can protect a business from being divided during a divorce. However, it is important that the agreement is properly drafted and meets certain legal requirements to be enforceable. It is recommended to seek the advice of a solicitor experienced in family law and prenuptial agreements.

What role do business valuations and appraisals play in dividing business assets during a divorce?
 
 

Business valuations and appraisals play a crucial role in dividing business assets during a divorce. The court will consider the value of the business when deciding how to divide the assets between the parties. A professional valuation will be required to determine the fair market value of the business, which will be used to determine the amount of compensation that one party may be entitled to receive. The valuation will also help to ensure that the division of assets is fair and equitable.

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