Divorce is a challenging and emotional process, but it can be even more complicated when business assets are involved. Determining the value of the business and how itwill be dealt with and, if necessary, divided between the spouses can be a complex and time-consuming process.
At Denney King, our legal advisers have extensive experience handling complex business ownership issues in divorce. We can help shareholders, partners and sole traders to navigate the legal process and achieve a desirable and workable outcome. Whether you are seeking to retain ownership of your business or negotiate a fair settlement, we can provide the guidance and support you need.
Here are some considerations to keep in mind when navigating the complexities of business ownership in divorce:
Valuing the business
- The value and liquidity of a business is an important factor in determining how it will be treated in a divorce. There are several methods that can be used to determine the value of a business including a net asset basis and a capital future maintainable earnings basis.
- We work closely with expert valuers and your accountant and other trusted advisors to ensure that your business interests are accurately valued in the financial proceedings.
- At Denney King, we take the time to understand your priorities for your business and to work with you to achieve a financial settlement which protects the viability of your business. We will also help you to establish whether there are any tax implications and/or issues of liquidity which need to be factored into any negotiation or settlement.
How the business will be treated
The value of the business would be taken in to account, it does not necessarily mean that the other party will receive a direct interest in the business. The Court is very reluctant to order a sale of a successful business and will usually try to offset the value of the business against other non-business assets. If this is not possible, the Court could look at sharing the income generated from the business as an alternative. If there is a tax efficient way of raising money against the business or extracting cash from it, then a lump sum order may be made.
Third party interests
A shareholding in a private limited company is treated as a matrimonial asset and the Court can make a property transfer order to transfer shares. However, this may have implications on other shareholders and therefore careful consideration need to be given to third party interest.
Other complex considerations arise if a non-shareholding spouse is employed by the business. It is important to understand that they may have empl
oyment rights which arise out of the fact that they remain an employee, regardless of the marriage breakdown. Expert advice is crucial.
Ways in which you can protect your business assets
- A prenuptial or postnuptial agreement can be prepared to identify and ringfence business assets.
- Keep the company separate from any household finances to avoid intermingling of business and non-business assets.
- Negotiate an offset against non-business assets to ensure you retain control of your business. This may attract a discount as business assets are usually perceived by the Court to be risk laden in contrast to ‘copper bottomed’ assets such as cash or property.
If you are facing a divorce and have concerns about how the ownership of your business or other assets would be treated, do not hesitate to contact our experienced family lawyers at Denney King. We can help you understand your options and work towards a fair resolution. We are happy to offer an initial free, no obligation call, to discuss your specific circumstances. Please contact Holly or Mercedes today at firstname.lastname@example.org or email@example.com to find out how we can help you.