Getting divorced is rarely easy, and it does not tend to be something couples plan for at the outset of their marriage. Similarly, when spouses decide to go into business together, not often do they think about making a commercial agreement. As a result, divorce in cases where spouses own and run a business together can be even more challenging.
During the divorce process, emotions are heightened which can make decisions more difficult. When the spouse you are divorcing is also your business partner, you may be facing both the end of your marriage and the loss of a long-standing business dream. We understand how hard this prospect can be. In this article, we answer some of the most common questions about what happens when you own a business with your spouse and get divorced.
Will I lose my business?
Whilst the Court does have the power to order the sale of a business, it is not a power taken lightly, and the Court is very careful when considering making such an order. It is uncommon and such an order must be proportionate, fair and reasonable in the circumstances. Therefore, although each case is different, it is unlikely that you will lose your business or have to sell it if you do not want to – after all, a successful business can provide for you and your family for years to come, so it would not be in your interests to sell it off.
Coming to an agreement about the future of the business
The most straightforward way to determine what will happen to your business is to come to an agreement with your spouse. During this process, it can be useful to have the assistance of a trained mediator as well as the advice of a Solicitor. A mediator will be there to help guide you and your spouse through open discussions with a view to assisting you reach an agreeable settlement between you. In some cases, couples can continue to run the business and have a good working relationship post-divorce. However, this is often not the case and there are several alternative options for parties to explore if working, and running a business, together is not possible.
Can I buy out my former spouse?
One party may be able to buy out the other – i.e. purchase their spouse’s share in the business. There are several different ways to do this. Most commonly, one party will make a lump sum payment to the other in exchange for their share the business. Alternatively, one party may retain ownership of the business and make regular maintenance payments to their spouse/former business partner.
Splitting the assets of a business
If an agreement cannot be reached, or one party wants to buy the other out, the business assets will need to be valued by an appropriate professional before they can be divided. In many cases, the business assets will not be equally split between the parties – for example, when an agreement has been drawn up or where one party has spent more time building the business. Dividing business assets on divorce can be complicated, so we would always advise seeking specialist legal advice on your position.