How is a Business Divided in a Divorce?

Even the most amicable and straightforward divorces can get complicated but if you are a business owner, your business assets could be included in the divorce settlement, depending on your situation. 

There are lots of different types of scenarios for businesses being divided in a divorce, such as your spouse being part of the business. You could also be a joint owner of a business with someone who is going through a divorce, which is another situation where the dividing of assets can get quite complicated. Each individual situation will have different results, but these are some of the common scenarios:

Both parties are shareholders

If you and your spouse are both shareholders of the business, the business would be valued and in the interests of achieving a clear financial break, one party could be offered other matrimonial assets in return for transferring their shares to the other.

It is very rare that a court will order a sale of the business to resolve a fair outcome but this has happened in the past where the spouses are unable to agree to another solution.

One party is a shareholder

In cases where one spouse has no interest in the business, the business can often be totally left out of the divorce settlement. This is generally the case where the other spouse has had no connection to the business, the business was set up before the marriage and the spouse had no impact on the running of the business.

However, if the business was set up during the marriage and one spouse supported the family while the other set up the business, then the court may decide that the non-involved spouse is still to be awarded a share of the business. Again, this would usually be resolved by giving them a larger proportion of other assets, such as the house or any savings, for example.

Where there is a business partner outside of the family

It is unlikely that a court will make any decisions that would lead to the detriment of the business partner that is not getting divorced, so in this situation the business will usually not be considered as part of the divorce settlement.

However, different situations can mean this is not the case, so if you are worried about how a business partner divorce could affect your business, it would be a good idea to get advice from a legal expert.

There have been cases where a business owner takes on a business partner prior to the divorce to try and protect the business assets and the courts will investigate whether this has been attempted to keep the assets out of the divorce, so it will usually be identified.

Valuing of the business

Valuing the business is an area where disputes can arise, which is why an accountant may be required to provide a professional valuation, including assets and income. It is recommended that a completely independent accountant is used, rather than the one that one partner has already been working with through the business.

In some cases, mediation is a good option to try and resolve the complications of dividing a business where an agreement cannot be met, as this can save the legal costs of solicitors working towards a resolution. 

Every case is different but factors such as how much involvement each spouse has had with the business, whether they are named as shareholders, whether there are any other shareholders, and the value of the business will be reviewed by the court when deciding how a business gets divided in a divorce.