How does a divorce work when you own a business together?

Divorce and Owning a Business Together - Everything Your Need To Know

Separating from your spouse or partner when you own a business together is challenging. It can also be heartbreaking. It could be the main source of income for both of you. Both of you might want to retain the business so you have a job, an income and a purpose. So how does divorce and owning a business together work?

Who gets to keep the business?

There are no hard and fast rules about who gets to retain the business. If it can’t be agreed it will be up to a judge or arbitrator to decide. But in the meantime, the business is likely to suffer because the two of you aren’t working as a team and you are distracted by the cost, time and stress involved in litigation against each other.

If there were difficulties working together in the business before the litigation started it is bound to be a lot worse by the time you get to court. So by that time, there might not be much of a business left. A business the two of you probably worked very hard to build.

Owning a business together when you don’t want to be together.

The first step, before or after you separate, is to try to decide if the two of you can keep working in the business together and for how long.

For many couples, it is just impossible and so one of them has to leave immediately. But where do you go if that is your source of income? And why should one person have to leave while the other gets to stay? Most of the time it will sort itself out because the business can’t function if one person isn’t there (such as a tradesperson). But other times again a judge or arbitrator might have to decide based upon the unique circumstances of the case what arrangement will best preserve the value of the business and incomes of the parties.

But there will usually be one person who desperately wants or needs to stay in the business. Perhaps they can’t get a job somewhere else. Perhaps the business utilises their unique skills which won’t work somewhere else.

So often businesses succeed because of the skills and talents of both parties. Whilst the relationship was happy at home it was also happy at work and the blend worked well. But take one person out of the business and it doesn’t work nearly as well (or as profitably) or at all.

There are some circumstances where the best outcome for the business is for it to be sold or wound up. It is just not financially viable for the business to continue. Fortunately, this doesn’t happen often.

What is your business worth?

In the majority of cases, the parties will agree for one of them to retain the business provided the value of the business is determined and included in the pool of matrimonial property available for distribution. Then it’s a case of trying to agree on a value or having the business valued. After that, there will usually be negotiations which will lead to an agreement about how the property is to be split.

But for the party who has had to exit the business, it will be difficult. They may have lost their income and find it hard to obtain another good income. That might mean the person who has retained the business and has a good income has to financially support the other until such time as they do.

Sometimes there are other people in the business and that’s where it gets even more difficult. Not only does the couple have to try to negotiate an arrangement, they also have to try to negotiate an arrangement with others. Again if those negotiations are unsuccessful it will end up in court with a judge making the decision.

If you own a business together with your spouse and are considering a divorce then book in a time to discuss your situation.  In most cases, it is far better to get professional advice early. Start the negotiations and try to get the property divided quickly. That way there is a much better chance of the business escaping without too much harm and both parties being able to move on with their lives.

 

The Show Must Go On…

A Guide to Help Small Business Owners Better Understand & Navigate The Separation Process.

The Show Must Go On...

A Guide to Help Small Business Owners Better Understand & Navigate The Separation Process.
The guide includes:

  • An overview of the impacts a separation can have on your personal life & business.
  • A summary of the complexities small business owners will face when going through a separation.
  • An explanation of the family law process that small business owners will face.
  • Ways small business owners can limit the stress and impact that their separation has on their business.