If you are a business owner and have worked hard to grow your business, it may become challenging in the unfortunate event you file for a divorce, as it is common to be considered part of the division, whether you are a sole trader, or own a private company or a limited company. Usually, if one party has more invested than the other, or has their own assets, you can file for an unequal division of family property. However, it can be a little tricky with business assets, unless you have put in place extra protection.
The court will need a full understanding of your business, how it is run, and the value of the assets to determine if, and how, it is split between parties. During a divorce, you will need to provide the courts with the company accounts and all your shares and assets in the business. In some cases, the courts might deem it necessary to obtain their own valuation of your business by an independent contractor, depending on the situation. This information will help the courts determine the value of your business. The courts then have the power to make orders, such as the sale or transfer of the whole or part of the business and/or shares, the division of the business, or any lump sum payments they deem are necessary to the other party.
Here are some top tips to help you protect your business assets in the case of a divorce.
#1: Don’t Jump Into Including Your Spouse in Your Business
It may seem like a good idea at first, to involve your spouse in your business, either because you are in the honeymoon phase of your relationship, or because you can benefit from tax reliefs, but you shouldn’t jump into the decision too quickly. While it is a nice idea, make sure you consider the depth of involvement, as it could be argued they contributed to the success of the business, as well as what legal contracts you will put in place. You need to make it formal and have a comprehensive agreement in place setting out the assets and voting rights your partner is entitled to.
#2: Include Your Business in Your Pre or Postnuptial Agreement
A pre or postnuptial agreement is a great way to protect your business assets. This is a common agreement used between spouses when they have particularly wealthy assets, such as properties or businesses that they own before the relationship, or just simply want to keep separate. This tool enables you to safeguard your assets in the case of divorce.
#3: Seek Legal Advice
In all cases, you should seek legal advice. A lawyer will be able to properly equip you with the right agreements and tools in place to protect you and your business, in the unfortunate case of divorce. It can be difficult to think about at first, as no one likes to plan for the worst-case scenario, but it can save a lot of challenges and fall out in the future.
If you have worked hard to grow your business, you want to make sure you protect it from all angles.