Divorce: Protecting Your Business
Blog | 30th October 2019
Family & Divorce
At KBL we regularly advise clients who own their own business, whether this is as a Sole Trader, Partnership or Limited Company. The most common question is “how do I protect my business?”
A business is an asset which is potentially relevant when couples separate. If the business has a value then this can be taken into account when the Court is considering how to divide a couple’s assets. Alternatively, the business maybe a means to generate an income, rather than having an inherent capital value. Below are some top tips:-
- If your business pre-dates your marriage you should give serious consideration to a Pre-nuptial Agreement. It may not be the most romantic aspect of planning a wedding but it can be vital in protecting your business, and other assets, from future claims on divorce. If you are considering a Pre-nuptial Agreement make sure that you do so in good time, the agreement needs to be signed at least 30 days before the wedding and it can take some time to gather the required information and draft the documentation. Both parties to the agreement should have legal advice and exchange full and frank financial information. The divorce process can be expensive. The cost of preparing a Pre-nuptial Agreement can be almost inconsequential when compared to the cost of a divorce, or indeed the wedding.
- Consider a Post-nuptial Agreement – if you have already married and then begun a new business venture there is merit in considering a Post-nuptial Agreement to reflect any agreement in respect of your business and other assets in the event of future separation.
- Take detailed advice from employment, tax and family law specialists before formally involving your spouse in your business. Whilst there are obvious tax advantages of involving your spouse in your business, it can have far reaching consequences in the event of separation. Whilst the involvement or lack thereof of a spouse in a business will not automatically effect how the court decides about the way the business should be considered it is nevertheless important to ensure that any steps you take are informed. Active involvement of your spouse in your business may increase the extent of their claim against your business.
- Ensure that you keep good records and keep your family finances and business financial arrangements separate. Whilst this is good practice in any event, this will make the process of exchange of financial disclosure upon separation much more straightforward and will also assist if an expert is required to value the business.
Dealing with businesses on separation is a specialised area of Family Law and you should seek early advice from a Family Solicitor, who can give tailored advice about your particular circumstances working in conjunction with your accountant, or other experts, in appropriate cases.
Our Family Law team is headed up by Partner, Victoria Melling who has in excess of 18 years’ experience and is a highly respected practitioner with a wealth of expertise in all aspects of Family Law. All of our Family Law Solicitors are recommended in the Legal 500 and are Resolution accredited which means they’ve demonstrated excellence in complex financial remedies, private children law and protection from domestic abuse.