Dividing Business Assets in Divorce

Dividing Business Assets in Divorce

Dividing Business Assets in Divorce

Going through a relationship breakdown is a difficult and emotional process, the addition of dealing with finances and dividing business assets in divorce can be daunting. Our family law experts are here to help and are experienced in handling divorce cases involving business interests. We answer some commonly asked questions about divorce and business.

Are Business Interests Shared Assets?

The type of business structure may impact how a business is divided during divorce. In many cases, business assets will be considered within the divorce settlement, this may include if one party is not named on the business, has not had any involvement or if the business was set up before the marriage.

Common Types of Business Structures in Divorce

  • Limited Companies in Divorce

Typically, limited companies are not protected from divorce and can be seen as a matrimonial asset. One or both separating parties could own the business and third parties may also be involved with the limited company.

  • Sole Traders in Divorce

A sole trader is in control of the assets of the business, as part of the financial settlement assets such as properties and vehicles may be taken into consideration. Sole trader valuations are usually more straightforward in comparison to other company structures.

  • Business Partnerships in Divorce

Business Partnerships can have an added layer of complexity as to determine a fair valuation, a percentage split based on the parties involved and their ownership would need to be calculated for various business assets.

How Is a Business Valued During a Divorce?

When dividing a business during a divorce and going through a financial settlement, the business will need to be valued. How a business is valued will depend on the type of business, typically an independent valuer will be appointed. There are numerous ways in which a business is valued some of these methods include:

  • Earnings Multiplier

This method assesses the maintainable future earnings and attaches an appropriate multiplier. Figures are based on the profit of the business, usually in recent years.

  • Asset-Based Approach

Businesses that have substantial assets such as property may be valued by an asset-based approach which focuses on the value of the business’ net assets.

What Are the Options for Distributing Business Assets

It is important to note that family courts recognise the income value a business can generate, and consideration is given to ensuring the continuation of the business with the business owner. Going through a divorce with a business does not mean the only option is to sell the business and this is rarely the case. Once the business or business assets have been valued options can include:

  • Spouse Buyout

If both parties are owners of a business, it may be decided for one party to buy their spouse’s share of the business where the business will continue under the ownership of a sole party.

  • Continued Co-Ownership

If it is agreed and in the best interest of both parties to continue operating the business, agreements can be put in place which outline individual responsibilities, roles and ownership following the divorce.

  • Matrimonial Assets

If one party has ownership of the business, negotiations may be made whereby the business owner retains their business interests through the split of other matrimonial assets.

Contact Us

When dividing a business during a divorce, there are many additional factors to consider, and the outcome of your case will depend on your circumstances. Our family lawyers are experienced in dealing with matrimonial matters involving businesses, Contact us to speak with one of our specialist family law solicitors.

Published: 5 January 2024

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