Business Assets & Divorce

The common approach to this issue is for the business to be valued as part of the divorce process by a forensic accountant who is appointed by both parties’ solicitors. They can also be asked to provide an opinion on other important factors that should be borne in mind when considering a business case, such as issues of liquidity and whether one spouse can draw significant sums from a business to meet a financial settlement.

In some divorces, there may be concern that one spouse is hiding money through the business or through a group of companies. In those cases an expert accountant will need to be instructed to thoroughly investigate that spouses' business affairs.

A usual step is for your company accountant to provide an idea as to value, but this figure is rarely acceptable to anyone other than the business owner. In the event of a dispute, an independent expert is appointed to provide a valuation as to the business and/or your business interest.

It is extremely unlikely that your wife or husband would be given a direct interest in your business, since for the vast majority of divorcing couples, this would be completely unworkable. The more common approach is that if you were to retain your business, then your spouse may be given some other assets to compensate them, or a capital payment (known a lump sum).

Usually, a business is the main source of financial support, and therefore the courts main concern is to try to preserve it wherever possible, so it is rare that a court would order a business to be sold. It is often the case though that if a business is to be preserved, then the other spouse needs to be provided with sufficient capital and/or maintenance to address any imbalance. There are usually a variety of ways to achieve this and it is important to ensure that the liquidity of the business and appropriate timescales are considered carefully alongside accountancy advice as to how best any such sums can be extracted from a tax perspective.

Each case is taken on its own merits and many factors influence the amount of payment that is suitable. However, the first step is to ascertain what the business is worth. Once this is done, the next stage will be to see how much if anything can be extracted from the business. This can be done over a period of time, if appropriate.