In this article, we’re looking at three ways in which your business may become entangled in your divorce proceedings.

A divorce – particularly an acrimonious one – can impact on many areas of your life, including your social life, your finances and even your relationship with your children.

As if that’s not enough, Belfast solicitors and many legal professionals are well equipped to advise couples going through a divorce, particularly if there are concerns surrounding how a divorce could impact a business asset. In this article, we’re looking at five ways your business may become entangled in divorce proceedings – and how to protect this asset.

Could Divorce Impact Your Business?

There are a few ways in which your business may be impacted by your divorce, including:

1. Shares in the business

If your spouse owns shares in your business, this isn’t necessarily a problem as you may be happy for them to continue to hold these. If, however, your spouse owns a considerable number of shares, this could potentially impact on your business.

If your spouse owns a large or majority of shares in your business, this may entitle them to have a say in the running of that business. If this is not acceptable to you, a court will usually order you to buy these shares as well as paying further compensation to your spouse.

2. Co-ownership

If you and your spouse both own the business – i.e. you’re both named as owners on the legal documentation – it’s unlikely that either of you will want to continue running the business together.

In this instance, your only real option is for one party to buy out the other, after which that party will have sole control over the business. In the instance that both of you own the business, it’s a good idea to have a contingency plan in place in the event of a divorce as if this comes down to legal wrangling, your business operations may be suspended for a period of time during the divorce.

3. A matrimonial asset

In many cases during a divorce, what happens to your business will depend on whether it is considered to be a matrimonial asset or a non-matrimonial asset. If your business was founded or set up after a legal marriage, it will generally be considered a matrimonial asset.

Whereas, if the business was started before the marriage, it can be considered to be a non-matrimonial asset.

This is important as, if your business is a matrimonial asset, it becomes part of the division of wealth during your divorce. This will mean that you will probably have to either pay your spouse a lump sum or give them shares in the company.

How to Protect Your Business During a Divorce

It’s a sad fact that 42% of UK marriages end in divorce and while this may impact on your life, it doesn’t have to also impact on your business. In this section, we’re looking at a couple of ways in which you can protect your business from divorce:

A prenuptial agreement

If you own a business and are planning to get married, a prenuptial agreement is a really sensible idea. This is essentially a contract between a couple which is drawn up prior to their marriage, which lists how assets will be divided in the event of a divorce and under what circumstances. By creating a prenuptial agreement, you can protect or ring fence your business by stating that your business will not be part of the division of assets in the event of a divorce.

In the UK, relatively few couples opt for a prenuptial agreement as it is seen as unromantic and almost an admission that the marriage may fail. While this may be the case, if you own a business, this type of agreement can save you a lot of time, money and hassle should your marriage end in divorce.

A postnuptial agreement

While slightly less common, a postnuptial agreement can be drawn up after a marriage in order to protect your business. In this instance, it may be that the business is a matrimonial asset or that your spouse is involved to some degree in running the business.

Within this agreement, you can limit your spouse’s claim on the business as an asset by perhaps stating that they will receive a lump sum or a set number of shares in the business in the event of a divorce.

Protecting your business asset during divorce…

When the owner of a business embarks on a divorce, it can create tension and uncertainty for everyone involved in the business. By putting in place an agreement prior to or shortly after a marriage, you can help to ensure that it will be business as usual for yourself and your employees – even if things are less than calm at home.

Please be advised that this article is for general informational purposes only, and should not be used as a substitute for advice from a trained legal professional. Be sure to consult a lawyer/solicitor if you’re seeking advice on the divorce. We are not liable for risks or issues associated with using or acting upon the information on this site.

Images