How to Protect your Business During a Divorce
Going through a divorce can be an extremely emotional and stressful time. Financial settlements, especially where there is a business involved, can be especially stressful because of the complexity of the process. However, although business interests are indeed an added complexity, there’s no reason why they cannot be navigated smoothly with the correct support and advice. With that in mind, here are our tips on how to protect your business during a divorce.
The truth is, there may be financial implications on your business when you decide to embark upon a divorce. During the divorce process an assessment and decision would need to be made by the divorce court as to whether your enterprise is a 'matrimonial asset’. However, even if your business is classed as a non-matrimonial asset, your spouse may still be entitled to a financial share if it is deemed that their needs require.
Although the parameters are quite complex, the following considerations are a good place to start when considering how you protect your business during a divorce. For example, are you and your ex-partner both involved in the business, and do you both want to be actively involved during the divorce? Does your business only involve one of you, with the other lacking knowledge of the way it is run? Other considerations to begin with may include whether the business was a family business that was inherited, or whether it was well established before the marriage.
Whatever the circumstances however, there must be full disclosure of all assets including those jointly and solely owned. Of course, it can be hard to extract cash from the business to pay the other party a lump sum without damaging the business and its ability to produce an income. It’s worth remembering that the divorce process is not designed to damage a business so that it is no longer viable. Damaging the business would be extremely counterproductive in fact, as the income the business generates would most likely be the business owner’s main source of income both before and after divorce or may be needed to fund child maintenance payments or spousal maintenance payments.
It’s crucial to be careful when making decisions relating to a business in a divorce. For example, you may need to organise to have the business valued independently, which the Family Court will take into account when dividing up the assets between you and your spouse. This is the case regardless of whether you are a sole trader, or you run a limited company or partnership.
Protect your Business with Legal Advice
As matrimonial solicitors, we would always recommend getting advice from a legal professional who can take you through the process step by step. If you’d like some advice on ensuring your business is valued fairly and accurately, guidance on how to remove your spouse from the business, or advice on dividing the business, we can help. For immediate, friendly, and professional advice, call us on 01246 555610 to arrange a free initial, no obligation consultation.
By Vines Legal on 21 Nov 2022, 11:16 AM