I am often asked to give my view on how the courts approach cases where couples are divorcing and one of their assets is a business. Businesses on divorce is a highly specialised area, and the approach to a business divorce case requires careful consideration and handling in order to avoid as much disruption to the business as possible.
Here are the answers to some common questions:
Is the value of my business taken into account when considering how to divide our assets?
Each case is different, but yes, in most cases the value of a business is taken into account along with the value of any other assets such as the home, savings, pensions etc. The value of the business itself can often be a contentious point with both parties usually having a very different view as to what the business might be worth.
How is a business valued on 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
Is my spouse entitled to half of my business?
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.
Will the court force a sale of the business?
Usually, a family 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 family 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.