A divorce can be an extremely stressful experience for all those involved. When a business is involved it can be even more stressful, with both parties worried about what will happen to their livelihood when they divorce.
Understanding how best to protect a business during divorce is vital and there are various options available to business owners. Seeking legal advice from a specialist divorce solicitor, who has experience of protecting businesses during divorce, is vital.
How will divorce affect my business?
A fair financial settlement which meets the needs of both parties is what the court will strive for in a divorce.
However, fair does not necessarily mean a 50:50 division of assets.
If one party owns a business, the business’s assets will normally be taken into account when it comes to the divorce settlement. This means that, for example, any money in the business could be used to settle wider divorce claims.
As a general rule, if one of the parties does not want the business to be sold, the court will try to find a way to distribute the assets fairly without selling the business. For example, the value of the business could be offset against other assets in the marriage.
In some circumstances, shares or income from the business could be divided.
As part of financial disclosure, it will be vital to value the business in order to understand how much the business is worth for the financial negotiations. It is important to seek legal advice from a solicitor experienced in this area.
The history of the business, including the roles of both parties in the business over time, will also play a part in the negotiations.
Other information about the business, such as who set it up and whether or not another party is involved, could also affect how a court will decide to deal with a business as part of a divorce settlement.
Do I have to go to court if I have a business in a divorce?
No. Going to court can be costly and time-consuming, which it why it is normally viewed as an option only if nothing else works.
If you are unable to reach an agreement with your spouse about how your business will be dealt with upon divorce, you can try mediation or solicitor-led negotiations.
How can I protect my business before a divorce?
It is crucial to seek legal advice in order to ensure that your business is protected in advance of your divorce.
A pre-nuptial (or post-nuptial if you are already married) agreement can help to ensure that your business is protected, should you divorce in the future.
If you would like to know more about how to protect your business during (or before) a divorce, get in touch to book your free consultation with one of our experienced family lawyers.
Neil Graham, a Partner at Grayfords, comments as follows: “The value of all assets, including any business assets, will be relevant when attempting to resolve the finances. Where there are financial proceedings the court has the power to appoint an expert, who owes a duty to the court rather than to either of the parties, to identify the value of any business assets in seeking to arrive at a fair outcome for both parties. Although specific to the facts of each case, there are arguments than can be deployed to mitigate the extent of any claims against business assets, such as in relation to the value, liquidity or marital nature of those assets, for example. The success or otherwise of those arguments can have a significant effect upon the ambit of a party’s financial claims. It is, therefore, important to obtain specialist advice as early as possible and at the outset of a case at the latest in order to maximise the chances of identifying those arguments and of their succeeding.”