Navigating divorce is harder when a business is involved – the experts at Flint Bishop look at how to protect your interests and plan for the future.
Divorce is never easy, and adding a business into the mix can complicate matters. The main goal in a divorce is often to achieve a clean break, allowing both parties to move forward independently. However, when business interests are involved, this can be more challenging.
While joint ownership of a business can be retained after a divorce, many couples find it difficult to remain business partners. Where this isn’t possible, or if only one spouse has a business interest, the court will typically seek to preserve the business, as it is often a primary income source.
Establishing the business’s value is crucial, as it will be considered alongside other assets like property, savings, and pensions when negotiating a financial settlement. Understanding the business structure and options for realising business interests is also key.
Considerations include how business involvement will continue, the division of shares in a limited company, and any interests held by family members or third parties. A common solution is a buy-out, where one spouse retains control by purchasing the other’s share.
As businesses are not liquid assets, extracting cash can be complex and have significant tax implications. If immediate funds aren’t available, payments can be made over time, or your spouse may receive a larger share of other assets and/or maintenance.
While a formal business valuation isn’t always necessary, it can help ensure the correct sum is paid and account for factors like liquidity, tax implications, and timescales. Your solicitor can advise whether an expert valuation is needed.
Other key considerations include:
- Shareholder agreements. Selling business shares can be difficult if there are multiple shareholders. However, if the court orders a transfer of shares to your spouse, a shareholder agreement can help limit post-divorce disputes.
- Employment claims. Terminating your spouse’s employment in your business could lead to legal claims. Consider taking legal advice prior to making any rash decisions.
- Nuptial agreement protection. Pre-nuptial or post-nuptial agreements can protect business interests and reduce disputes in the event of separation. These agreements are particularly useful if one party owns a business before the marriage or if children have an interest in the business. While not legally binding, courts are likely to uphold nuptial agreements if they are deemed fair and freely entered into. Expert advice is essential.
- Dispute resolution. Disputes should initially be addressed with independent legal advice. Alternative dispute resolution methods, such as mediation or collaborative law, may be worth exploring as alternatives to court proceedings.
If you’re in need of advice regarding divorce and separation or would like information in respect of nuptial agreements, shareholder agreements, or employment claims, the experienced lawyers at Flint Bishop can help.
Specialising in wealth preservation, we’ll provide the guidance and support you need to make informed decisions. Speak to the team using the contact details below:
01332 226122
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