If you are a business owner, or have business interests with your former spouse, then there are a few facts to help you better understand your position in divorce. Finances and dividing business interests in divorce are complicated. For this, there are some rules that come as a surprise for separating couples. For example, if you didn’t divorce but just separated some time ago, and recently experienced business success, it is possible for a former spouse to ask for a pay-out. In this article, read about different circumstances related to business division and divorce to get a clearer picture.
Different rules in different places
First, the rules in the UK vary. In Scotland, the general rule is that a business set up during or after your marriage is a ‘matrimonial asset’. While in England, Wales and Northern Ireland, the value of any business is a financial asset in divorce proceedings.
Business valuation in the eyes of the courts
If there are business interests in divorce, then valuations occur if you and/or your former partner have significant shares in a company, or you own it entirely. When a business appraises, a number of factors take into account. These are: whether the business is a Limited company, a partnership, or operating as a sole trader. The amount of revenue generated from the business and what this forecasts at considers as well. Additionally, any property or assets associated with the company also come into the equation.
When possible, courts leave the business with the owner. This then balances for the remaining spouse by attributing a greater share of the other assets. There is room for maneuver too, for example, if one party has assets in the form of cash while the other has assets tied into the business. If you find a way to reach a conclusion between yourselves, then this makes the process of dividing business interests in divorce easier and less time consuming.
Complications with valuations
Complications occur when valuing a business. For instance, a partnership involves another person which complicates a valuation. Similarly, a Limited Company involves other shareholders which causes valuation challenges. Also, with a sole trader structure, complexities arise due to the personal liability the business takes on for debts. In these cases, property, and vehicles take into consideration.
Valuation disputes
If there is a disagreement on the valuation of your business, ask the court to investigate this in more detail, for example, by obtaining back accounts. This occurs if, for example, one of the parties drastically undervalues the company to reduce how much they pay out. Additionally, ask your legal representative to investigate the company accounts or if possible, you and your ex-partner arrange for an agreed independent expert to make a valuation. If necessary, you each have your own valuation expert, but this increases costs. Another alternative is to go through mediation to try and reach a resolution.
Conclusion
No matter what the circumstances, in divorces, judges always seek to find a ‘fair’ solution. This is the guiding principle you take in your own business’s case too. The more you agree outside of the courts, the smoother the process is. If your case is potentially complex, obtain the advice of a qualified divorce lawyer from the outset.
