This article was written by Heidi Bishop.
If you are about to go through a divorce, the proceedings can be complicated even in the best circumstances. For those going through a divorce with business, interested to divide on top of the personal side of the arrangements, it can become even messier.
There are a number of factors to consider when looking to split a business between divorcing partners. You should undertake the advice and professional guidance of specialist divorce lawyers who understand how to navigate the tricky waters of business and breakups.
Talking Business Interests During Divorce.
It is imperative that you get legal advice in these matters as it can quickly become complicated without the correct advice.
In England, Wales and Northern Ireland any business interests and their value can be taken into account as one of the matrimonial assets to be divided upon divorce.
In Scotland these same business interests are only taken into account as matrimonial property if they were set up or bought into after the marriage or civil partnership.
This can change if there has been a significant increase in the value of the business interests since the romantic relationship as recognized by law.
Financial Settlements Involving Businesses.
The court system tends to favor leaving the business and all those assets to the owner. With the other partner being compensated with either a larger share of other matrimonial assets, or through an on-going maintenance agreement.
In the majority of cases this is what couples prefer to take place, though a divorce court can be flexible, helping to arrange a share of the income or dividing shares.
The ideal scenario would not be to leave one side of the partnership with all the cash assets and the other with only assets that are tied up within a business or other asset, but it does often happen that way.
Valuation of a Business.
It is important to have an accurate and impartial valuation of the business prior to divorce proceedings taking place. If one person owns the business outright it is he or she that must ask for a valuation for it to take place.
The valuation of a business might depend on a range of factors, including the physical assets, the current earnings and projected future profits, and the structure of the company – is the business a limited company, a partnership or sole trader?
Reasons to Gain Expert Legal Advice
If your partner owns a business, either as a whole or a portion of, you might not be fully aware of its structure and what that means.
There will be different ways to value a business that runs as a sole trader to one that is a limited company or a partnership.
Having the legal guidance to navigate these waters will ensure you do not lose out from an inaccurate valuation. In some cases there is a dispute between the divorcing couple of the valuation of the business in question. Often when only one person has been actively involved in the business.
You can apply to the court for information from your ex-partners bank or accountant directly to see if they are undervaluing the business.
It can be a messy process to divorce and split the assets of a business that one or both persons have been involved with throughout the marriage or civil partnership.