What Happens to My Business During Divorce?

What Happens to My Business During Divorce?

You may have some questions about owning a business or being self-employed during your divorce since running a business raises details that wouldn’t exist if you both had a conventional 9-5 job. Luckily our experienced divorce solicitors Liverpool are on hand to guide you through the differences and find a reasonable solution that benefits you and your family while protecting your commercial and financial interests.

Owning a business will almost certainly play a part in the financial proceedings following your divorce or civil partnership dissolution. During financial proceedings courts consider many factors such as the ages of the parties, the length of the relationship, contributions, health issues, and, most importantly, the couple’s financial needs and resources. Even if it is not your main income, your business is a financial resource.

Fortunately, each case before the court is determined by its own set of circumstances and the court strive for a fair outcome.

Who owns what?

Shares or debentures in a limited company, a partnership share, or a sole ownership business are all examples of business interests. Typically, only the interest owned by the divorcing or separating party is considered, but to be sure proceedings often involve a valuation of the entire business.

When it comes to dividing business interests in a divorce, the Courts can be flexible. In an attempt to reduce the disruption of a business, the court usually prefer to award the other party a greater share of the other matrimonial assets or a greater maintenance sum. This is preferred over forcing the other partner to sell their business or divide ownership between the two of them.

To best safeguard their own interests, businesses with 3^rd party owners, trustees or trusts that may have formed their own shares in them may request to be added to the financial proceedings.

Getting disclosure from these parties and understanding their roles can make things even more difficult when valuing the company so it is recommended you seek legal advice in this situation

What is it Worth?

In many cases, a privately owned business is the most valuable asset of the divorce. However, determining the worth of a private business can be difficult but with the help of our divorce solicitors Liverpool you are not on your own.

This can be made even more complicated when the company is actively trading or has international assets which could be held in interconnected onshore and offshore corporations or trust structures. Because of this, businesses can be challenging to divide in a divorce. Selling the shares may be impractical or impossible.

If a business has significant assets, investigations can be conducted to determine the value. Examining the accounts from the previous two years is typically the first step. The company’s accountant may create a “desktop” value if the business isn’t too big and there is enough confidence between the parties to agree. For larger or more complicated businesses, solicitors may need to jointly instruct an independent forensic accountant to prepare a detailed and fair report.

The most recent financial records of the company as well as accounts going back at least two years will be given to the forensic accountant. The business’s directors and the accountant will also have access and any capital gains tax considerations or potential tax liabilities are taken into account in the valuation process to gain a fair view of the business

Fees for the forensic accountants report are typically split evenly between the parties.

Dividing the Business

As mentioned, our divorce solicitors Liverpool will always try to negotiate a fair settlement surrounding your business and matrimonial finances. Having to divide a business is tough but there are many strategies to make sure your divorce and financial settlement is fair, including:

• Buying them out – if you both own shares in a limited company, one of you could buy the other out of the business.
• Offsetting – if you have other marital assets that are worth the same or more than your business interests, you could agree to give your ex-partner a larger share of those assets in exchange for keeping all of your business interests.
• Spousal maintenance – you could agree to pay your ex-partner ongoing maintenance if your business generates a significant income but not hold much capital value.
• Sell – As a final resort you could sell the business and divide the proceeds accordingly

With the help of our experienced solicitors we would aim to negotiate a fair distribution of your assets and business, if an agreement can be reached it can then be placed into a financial consent order and made legally binding by the court.