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How Can I Protect my Business When I get Divorced?

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Your business, its assets, and the way it is run will come under close scrutiny from the family court when you divorce. The court will ask that your business and business interests be valued as part of the financial disclosure, and there is a very real danger that your estranged spouse might think the value of your business is far greater than it is when the family’s assets are being divided.

The court will ask how much the business is worth, what income it can produce, and whether it should be producing more. You will need to disclose the last two years’ accounts and the projected income.  How these accounts are prepared can have a huge influence on the outcome.

Judges can look at the money in the business and whether that should be used to settle wider divorce claims; however, that money may be the funds you have set aside for expansion plans or investment in new technology.

To this end, it is essential that your needs, and the needs of your business, are treated in a fair way and seeking the advice of a law firm that fully understands both family law, as well as regularly dealing in corporate law, is vital.

While divorce often involves the sharing of assets such as the family home, savings and pensions, for couples where one spouse has significant business interests, the divorce process becomes more complex.

If you’ve built up a business from scratch, you don’t want to see it close just because of your divorce.

Every divorcing business owner or person should look at the options for protecting it and ensuring business continuity and getting expert help at the start of the process as early as possible can also prevent legal problems later on.

What is the likely outcome?

Most courts often leave the business with the business owner and give the other spouse a larger share of other assets, or maintenance, instead. This may be a favourable outcome for the business owner, but not always.

There could also be a division of shares or income from the business.

In rare cases, however, courts can also order that a business is sold.

What should I do to protect my business?

Make the court understand your vision of the business by giving them enough detail – don’t just give it the basics.

A court may not want to disrupt your plans for the business because of a divorce and will want to know why you’ve structured it in the way you have. Tell the judge your goals.

Also, answer these questions…

Who set up the business, and when was it established?

If it was set up before the marriage by you or your family, you could argue it’s value as a matrimonial asset. If your spouse has contributed to it, though, acknowledge it accurately. This combats them exaggerating or over-stating their part in your success.

Is someone else involved in it?

If so, there will be a different interpretation by the courts if taking money out of the business could damage someone else’s livelihood. The sale of shares can also be limited by the Memorandum and Articles of Association or a Shareholder Agreement.

Does your business have a lot of capital or is it income-rich?

This will determine the court’s approach. It will look at whether there are capital assets which can be sold without damaging the business or if it can be borrowed against. Some businesses are merely income streams, and the court can deal with this situation by a maintenance order.

Are you developing something now to sell later?

The court might track how that aspect of the business develops and look at your spouse sharing in some of the later profits.

What are your business’s strengths and weaknesses?

Explain the conditions in the market but don’t exaggerate problems. The court needs to see your description as credible.

Do you have a company or business pension?

If you do, what is its value?

Will you sell the business when you retire or pass it to your children?

This could strongly affect the way the court looks at the case.

These are just a handful of areas to consider, but one thing is sure, you need a law firm that understands both divorce and family law as well as corporate law.

At Peter Lynn and Partners, we not only offer both areas of law, but we have an excellent track record when representing business people to protect their family assets as well as their business assets during a divorce.

For expert advice and to arrange an initial confidential meeting, call 01792 450010 or email [email protected]