Divorce & business

It is common for one partner or both to be part of a family business. Family enterprises can be structured in a variety of ways which include sole traders, partnerships or limited liability companies. A divorce will potentially impact upon the business, emotionally and/or financially. A business within a family cannot be ignored or shielded from the divorce process simply because one partner has no involvement in it. Call our divorce law experts on 01616 966 229.

A business can suffer irreparable damage if couples working together use it as a battleground. On the other hand couples can remain working within the business after their divorce particularly in amicable separations, although they will always be advised to ensure that there are clear guidance and boundaries around their continuing business roles. During the divorcing process, these couples need to be able to keep their emotions in check and continue operating their business successfully, particularly if it is a primary source of income.

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Assets

All the assets held by the couple, whether separately or together, need to be valued as part of the divorce – which includes the business interest. Every case is different. Courts have wide ranging powers but a family business will normally be treated as an asset of the marriage and a Court has to decide on an appropriate and reasonable way to divide those assets based on a number of factors.

This does not necessarily mean that a business will need to be sold particularly if it is a successful enterprise. However, valuing a business can be one of the most contentious areas of the divorce process. There needs to be an understanding of who owns what and how much their interest is worth?

Disputes between a couple can concern one’s contribution to the business and its success. These situations have resulted in high profile celebrity settlements and require detailed analysis of the history of the business.

One simple solution is for one to buy out the other’s interest. Or, the business interest can be off-set against the value of the other family assets. The family home may be transferred to one party on the basis of the other retaining the family business. This possibility depends on the valuation of the assets generally and whether it would result in a fair settlement to both.

Sometimes a buy out or offset is not possible because a price cannot be agreed, or there is a lack of available funding, or that each is integral to the company’s success. In these situations there needs to be alternate resolution. One could remain within the business working alone on the basis that the other continues to receive a fair portion of the income. These alternate business solutions require clear and expert agreements.

Anyone with a business interest who is considering divorcing needs to seek legal advice at the earliest opportunity. Advice can be given around the availability of protective measures although these need to be put in place long before separation is on the cards, if you would like to speak to a specialist divorce solicitor call us on 01616 966 229.

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