None of your business!

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Divorcing couples frequently come to blows when considering the settlement of any business interests.

Often a business interest is considered to be a personal attribute and certainly not something to be shared out upon divorce! In some situations, where the business produces little other than an income stream the protestor may be right. It can often make sense to abandon pursuit of a business interest and look to share out instead the resulting income stream… why shoot the goose that lays the golden eggs?

In other situations, there will be an obvious business interest to address, for instance, where couples operate in business together in a Partnership or as Directors or Officers of a Limited Company. In such cases one party may have the option of buying the other party out or it may be possible to break up the business into independent units with each taking their part forward. In some rare cases the couple may even decide to continue working together. Matters become complex where other business colleagues are involved and, more so, where there is acrimony between the divorcing couple…Whilst it is rarely appropriate, or even possible, for a business interest to be simply cashed in, a value needs to be attributed so that options for overall settlement of the family assets, (property, savings, investments, pensions etc) can be properly explored.

Where it is agreed that a business valuation is needed the company’s own accountant should be the first port of call. It is also always worth checking the provisions of any Nuptial, Partnership or Shareholders Agreement in case provision has already been made for the method of valuation and even settlement arrangements in the event of a divorce. In the absence of prior written agreement, and continued dispute over valuation, the joint instruction at joint cost of an independent, forensic accountant may be necessary.

Any valuation will be subject to tax considerations and expert advice in this area can lead to huge savings particularly where parties are eligible for entrepreneurs relief or where a company is in a position to buy back its own shares.

Business interests come in all sorts of shapes, forms and sizes and the very nature of the interest should determine the time and money spent in establishing its relevance. For instance, a 51% shareholding in the family business will bear much more relevance than a 2% shareholding, though of course it depends what the family business is!

At Sharp Family Law we are committed to bringing value to our clients in all we do by providing a customised solution for each client and their family’s unique situation. We look to address all aspects of a client’s life, including their business interests, and focus upon the long term perspective so they can move forward successfully after their divorce.

Article by Sharon Giles

Sharon helps clients to reshape and rebuild their lives beyond a breakup and preserve relationships for the long term. She encourages them to look beyond their present situation, to visualise an alternative future and make informed and realistic decisions to shape it.