In this article, we’ll share our top tips for juggling your divorce when you own a business…
Going through a divorce can be an incredibly painful process. It can sometimes seem like it’s never-ending and spills over to parts of your life you deem separate from your marriage issues. This is especially the case if you own your own business.
Due to the increasing number of people choosing to leave the rat race to set up business for themselves, family law specialists are seeing more and more clients who are trying to navigate this tricky situation of balancing a successful business with an emotional and often stressful time in someone’s life.
Keep reading for our tips on managing a divorce whilst running your own business…
7 Tips for Dealing with Your Business During Your Divorce
- Don’t Think the Worst: First things first, it’s important to resist the urge to panic and perhaps do something rash. Your ex-partner’s solicitor will not be interested in damaging your business as, in many cases, that business will be paying for home payments and child support.
- Notify Co-Owners: If you are not the only owner of the business, you must let your co-owners know about the divorce as soon as possible. This way, they can be aware of, and prepare for, any changes which may be around the corner.
- Provide Correct Documentation: As we’ve mentioned, your spouse’s solicitor is not looking to ruin your business. But, they will need to see detailed, up to date documentation on the state of your company, including its financials. It goes without saying that you should never try to hide anything within your business or attempt to ‘tweak’ any of the financial records.
- Expect Your Business to be Valued: During the process, your business will be valued by an independent accountant instructed by yourself and your spouse. Valuing is not an exact science, so it’s important that you ask for advice on which accountant will be best for you and your business’s needs.
- Consider Buying Out Your Ex-Spouse: If your spouse owns shares in your company, this does muddy the waters a little as it’s unlikely that you will both want to remain shareholders. You may want to consider making an offer to buy your spouse’s shares as part of the divorce settlement.
- Tax On Shares: If you’re thinking about transferring your ex-spouse’s or your own shares in the company, the date of the separation may be important. When shares are transferred between spouses during the tax year of separation, the person who receives the shares has the responsibility of Capital Gains Tax liability.
- Don’t Take Risky Routes: Earlier, we mentioned the importance of not panicking, and this includes trying to transfer your shares in your company to a third party in order to reduce claims by your spouse. In the case of any asset transfers or disposals which occur in the three years prior to the divorce, the person getting rid of these assets will have to prove that this has not been done at an undervalue.
Think Ahead and Protect Your Business
If you own your own business but are not presently filing for divorce, it’s a good idea to protect your business now, however unromantic that may sound. You can do this by putting a few things in place, including a post-nuptial agreement.
This is an effective legal device for protecting assets for the long-term. Some other ideas include:
Consider a Prenup
A prenuptial agreement is, essentially, a contract that lays out the details of what will happen in the event of a divorce. If you have a prenup drawn up, and your spouse is not involved in your business, you can state in your contact that they are not entitled to any claim on your business, should the personal relationship break down.
Keep Business and Personal Expenses Separate
If you are married, or about to tie the knot, it’s really important to keep your personal and business finances separate as much as possible. Then, in the event of divorce, it’s a little more straightforward in terms of how much a spouse can claim.
Get Professional Advice
Before even attempting to embark on a divorce that could affect your business, it’s imperative that you speak with a reputable family law specialist who will help you to navigate your way through this often-complex process.
Although you may feel that you can negotiate the division of assets between yourself and your spouse, you may find that, without the help of an experienced professional, things will quickly get out of hand and end up costing you dearly.
Try to come to an amicable agreement first…
Going through a divorce is never going to be fun. The last thing you want is to have to hand over a chunk of the business that you’ve worked so hard to create.
With a divorce, particularly where a business is involved, it’s almost always a good idea to start by seeing if you and your spouse can come to an amicable agreement regarding the sharing of assets. If this is not possible, a good family law solicitor will be able to advise you on the best course of action for your business. They will also usually be able to help you find a mediator, should one be required.
What’s more, it’s essential that you make sure that all of your business records are accurate and up to date, and that you are able to provide these to the third-party accountant on request. Be honest and fair throughout, and the divorce process will no doubt be far easier.
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 divorce professional. Be sure to consult a divorce professional or solicitor if you’re seeking advice regarding your business during a divorce. We are not liable for risks or issues associated with using or acting upon the information on this site.
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