Divorce and protecting your business
Blog | 14th January 2019
Family & Divorce
The family law team at KBL regularly advise clients with their own businesses, whether this is as a sole trader, partnership or Limited Company. When couples are thinking of separating the most common question we are asked 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 may not have an inherent value or be an asset and is just a means to generate an income which may be relevant to meeting the couple’s respective income needs.
Dealing with a business 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.
If you are a business owner thinking about divorce (or marriage), there a number of things you should consider:
- A prenuptial agreement – if your business pre-dates your marriage you should give serious consideration to a prenuptial 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. The agreement needs to be signed at least 21 days before the wedding and both parties to the agreement should take legal advice and exchange full and frank financial information. Both weddings and divorces are expensive and you may find that the cost of preparing a prenuptial agreement can be almost inconsequential.
- 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 both employment, tax and family law specialists before formally involving your spouse in your business. Whilst there are obvious tax advantages of involving your spouse, it can have far reaching consequences in the event of separation. The 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. 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.
The Family Team at KBL are happy to provide a free initial consultation at our Bolton or Blackburn offices or over the telephone.