Lauren Preedy – Head of our Divorce Team

Companies & Divorce

Special considerations for business assets within a divorce

Business assets, whether in the form of shares in a limited company, an interest in a partnership or LLP, or those of a sole trader, will be considered part of the relevant assets of the relationship alongside other property or investments.

Unlike land/buildings, bank accounts and investments, an interest in a business can be difficult to value and is usually, by its very nature, illiquid.

A business interest is not necessarily an asset that can simply be valued by an accountant and its value added to the balance sheet of other assets owned by the couple.

A business interest could also be regarded as a resource – and the focus of negotiation/argument can be how much money can reasonably be withdrawn from a business to fund a financial settlement.

There are also cases when a business owner has been particularly successful and will want to argue that he/she has made a stellar contribution to the assets of the couple and that this stellar contribution should be reflected in a more lopsided settlement than might otherwise be the case.

Paul Jacobs FCCA: Our in house accountant

Other possible complications:

But there are also other possible complications:

if the value business is added to the matrimonial balance sheet and the settlement reflects the value of the business in the capital division – but then periodical payments are then funded by profits from the business – does this mean that the recipient is receiving a double benefit from the same asset to the detriment of the other?

To what extent was the value of the business generated before the marriage and has the growth in its value since the marriage been more passive growth? Should this mean that only some of the value of the business should be treated as a non-matrimonial asset?

Bridget Garrood; Divorce specialist

Are there other shareholders/partners/investors who have an interest in the negotiation and may wish to intervene? (If the business is a limited company – then it should not be forgotten that the legal company is a legal entity in its own right).

Is there actually a market for shares in a company?

If money is raised from a company either through withdrawing money or the sale of the company or shares in the company – then what are the tax implications?

Running a business is inherently risky and therefore how should a business be valued and its value be compared to safer assets such as property?

Have the couple can run the business together and do they wish to continue to do so? Or are there ways in which the business can realistically be split?

No two cases are the same and therefore it is recommended that expert advice is sought at an early stage.

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