What Happens to Business Assets in a Divorce?

Business Assets in a Divorce
Legally reviewed by: Shakeela Bi Updated: In: Family

The Complexities of Business Assets in a Divorce

Going through a divorce can be an extremely challenging time, with many complex factors to consider, especially when business assets are involved. As businesses come in all shapes and sizes, it’s important to seek specific legal guidance tailored to your specific situation. Business assets can include anything from shares in a multinational business to a small online business, to involvement in a business partnership. Whatever your business, if you are planning a divorce, an expert divorce solicitor can guide you through what happens to business assets in a divorce.

Seeking a Fair Financial Settlement for Business Assets in a Divorce

When determining a fair financial settlement during your divorce, the family Court will consider the value of any business assets. An accountant can advise you on how to calculate the sum of your business assets. However, it’s important to acknowledge that your spouse may not agree with the business asset valuation. Your spouse may believe the assets are worth more. In this event, an independent valuation by a forensic accountant at joint instruction and joint expense may be necessary.

How is the Business Owned?

One factor under consideration by the family Court during the evaluation process is determining how the business is owned. This is because, if you are a sole trader the business asset will be considered different in comparison to being a shareholder for a limited company. 

Sole Trader

If you are a sold trader, you own and control the business assets. This means you are also liable for any business debts. Therefore, the income and profitability (in most cases in the last two years) are the figures considered. However, business assets such as premises or vehicles are also considered in the valuation figure.

Business Partnership

For individuals in a business partnership, a partnership agreement is usually in place. However, in some cases the business partnership may be informal with no written agreement in place. If the business partnership is not between you and your spouse but through other partners in the business, valuing the business assets can become more complex, requiring expert help.

Valuing a Limited Company in a Divorce

Valuing a limited company becomes more complex when there are several shareholders. This is unless you and your spouse own all the shares, in which the process of valuing becomes simpler. In most cases, if you and your spouse are not the only shareholders, only the interest owned by you is considered. This will often involve overview and valuation of the entire business.

Seeking Tailored Advice from a Divorce Solicitor

When it comes to business assets in a divorce, no two cases are the same. Seeking early advice is vital for ensuring the best outcome for your family and your business. At Cartwright King our solicitors are experts in dealing with business assets in divorcee, working in collaboration with accountants and financial advisors to ensure you receive the best legal advice.

Frequently asked questions.

Do I have to sell my business if I am getting a divorce?

In most cases, businesses do not get sold in a divorce. This is because, business can provide income for a family. During a divorce all assets will be taken into consideration and both parties will need to reach an agreement on who gets what asset, reaching a financial settlement that meets the needs of both parties and their dependants.

What to do if your business partners/directors are concerned about the impact of my divorce on the business?

When calculating worth of business assets, usually only the business owned by you is taken into account. This will often involve an overview and valuation of the whole business which in some cases may make the partners/directors uneasy. In most cases, resolving issues without any impact on the business is very achievable. A specialist divorce solicitor can help you with early advice to ensure the best outcome.

Do I have to pay tax if my partner transfers business shares to me?

If you and your partner are joint shareholders and directors of your business, it is common for shares to be transferred to one party as part of a financial remedy order. This one party will retain their interest in the business. This is often in return of the other party receiving a lump sum payment. It’s important to be aware that capital gains tax may be payable upon transfer of the shares. It’s advisable to seek legal advice as there are tax exemptions available. Seeking early legal guidance can help you before starting any proceedings yourself. Getting early advice is important as some legal exemptions are only available in the first year of your separation. Furthermore, you may only be able to for exemptions if you are still legally married. An accountant will be able to advice you on this before you finalise your divorce.

Legal Disclaimer.

All advice is correct at time of publication.