Businesses and divorce

We understand family businesses...

Understanding the structure and value of a family business is key in a divorce. Every business is different. Specialist advice on your options and choosing the right approach is essential.

Dealing with the financial fallout from a divorce can be challenging legally but also emotionally. This is certainly true when the divorce involves a family business. Yes, it's an asset that needs to be taken into account in the overall divorce settlement, but it's not the same as cash in the bank or the family home. You might be able to sell it, but that may the last thing you want to do if it provides the family's main income or you plan to pass it on to your children. 

There are potentially complex issues to be considered. Valuing a business on divorce is not straightforward.  You need to assess the size and nature of the shareholdings, business and personal tax, the position of any other family or non-family owners and whether or how value can be extracted without undermining its future profitability.

Getting the right outcome requires more than just family law expertise. At Mills & Reeve our family team is part of a major national firm. We work closely with our business lawyer colleagues in our corporate and tax teams, and trusted external specialists, to provide you with timely, comprehensive and cost-effective service, advice and representation.

When dealing with businesses in a divorce or in connection with preparing a marital agreement (pre- or post-nup) you need to ask a number of questions including;

  • What type of business structure is it? Sole trader; partnership; limited liability partnerships (LLP); limited company? 
  • What does it do? Property development or investment; manufacturing; IT; tech; farming?
  • When did it start trading? Has it been in the wider family for many years? Or was it built up by one or both of you during the marriage or started before then, perhaps by previous generations of the family?
  • If it is a limited company who are the shareholders; what are their roles; is anyone absolutely central to the business's success; and what overall percentage of the shares do they each have?
  • What are your objectives when it comes to the way the business should be dealt with? Are you agreed as a couple that one of you is looking to keep their interest in the business perhaps with the other receiving more of the other family assets or is it going to be sold ?

These are some headline questions. We then need a more detailed analysis. For example, if we're looking at a parent company, we'll need to know the net value of the underlying assets before then seeing how that feeds into the value of the shares.  If it's a farming business what quotas and subsidies are there? Is there a family trust involved?

Our family law experts understand the law not just in theory but in practice. Our lawyers have shared their expertise and knowledge in two business books, Divorce and the Farm and Divorce and the Family Business. We have developed cross-professional working relationships within and outside the firm so you have access to all the expertise you need.

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