subject: Will Divorce Destroy Your Business? [print this page] This article looks at how the courts approach the division of business assets during the process of a divorce. When one or both of the persons involved in a divorce owns their own business an award to a spouse from the assets held in this business can still be made. Due to this it is crucial for couples in this position seeking divorce to contact a specialist divorce solicitor as soon as possible.
The main aim when dividing a couple's family assets is that the division is done in light of each spouse's contribution. Nevertheless, when it comes to business assets the courts have demonstrated a reliance on the precedent of a 50/50 split between spouses.
When dealing with business assets, the court can award a 50/50 split irrelevant of contribution to the business itself. This is a frequent occurrence where one spouse works and the remains at home. It is assumed by the court that the homemaker party has scarified their career on the basis of financial security received from the business assets in question. Not only this, but the non working party is assumed to have supported the working party in their business ventures.
In situations such as this, the court will not necessarily enforce a sale of the business to fulfil the conditions of the split. If the business is providing a suitable income, big enough to support the ex-spouse and any family involved, then maintenance money will be sought instead. Selling individual assets from the business whilst keeping it as a going concern can fulfill the claims of a divorce.
How does the court achieve a settlement?
You should obtain a current valuation of the business assets so that the court is able to negotiate a settlement. This valuation will need to demonstrate more than just the current balance on the books; it will have to show profitability of the business and it's potential future earnings. The valuation of the business should be done both as a going concern and what it would make if it were to be liquidated. The court will use this information in connection with all the usual factors it considers during divorce proceedings.
Once the valuation information is obtained, both parties should attempt enter negotiations prior to taking the matter before a court. Such negotiations can happen via mediation or collaborative law. Resolutions achieved like this can save both parties money spent on legal costs and court fees.
How can I avoid losing my business assets upon divorce?
If you have your own business prior to getting married then you should consider forming a prenuptial agreement.
However, if the process of creating your business occurred during your marriage there are certain actions that you can take to ensure that each party's rights are defined. Examples of these measures are creating a shareholder agreement or forming a discretionary trust. These agreements can include directions to how business assets will be divided upon divorce.
If you are considering implementing any of the above protective measures, it is always advisable to seek legal advice from specialist divorce solicitors prior to taking any action.
