Starting and building your own business takes time and money, and the last thing you want is to lose your business during a relationship breakdown. In this article, we’ll show you how to protect your company during a divorce.
Going through a divorce brings with it a huge sense of loss – not just that of losing your life partner but also the dividing up of treasured belongings and the memories that they contain. All of this can be painful enough but, if you own your own business, you may stand to lose much more than your record collection and custody of the cat during your divorce.
In the UK, unless stated otherwise, a business and/or its value will be included within the assets to be divided within the divorce settlement. This is the case even if one party has had nothing to do with the business. So, your partner may well be able to claim a chunk of your business during the divorce, even if they’ve never even set foot in your workplace.
Splitting a business in a divorce can be frustrating – and to be forced to give away something that you’ve worked so hard for would, of course, be devastating. This is why you need to act now to put one or more of the following in place to protect your company…
5 Ways to Protect Your Company During Your Divorce
Reaching an agreement
A prenuptial agreement is a contract that is created and signed by both parties prior to the marriage. It lays out how individual and combined assets – including any businesses – will be divided in the event of a divorce. This kind of agreement is designed to stop one or both parties from claiming property belonging to the other.
Creating a prenuptial contract can be a very simple way of ensuring that your soon-to-be spouse won’t get their hands on your business if they end up being an ex. While we realize that prenups are neither romantic nor sexy, they can save considerable time, hassle and money should the relationship break down. They’re sure to make splitting a business in divorce much less stressful.
By the book
This really ought to be just common sense but, where possible, you should always keep your household and business finances and accounts separate. As well as being good practice, this will simplify things during a divorce as it will paint a clear picture of your business income and expenditure.
This information which you will, in all likelihood, be required to present to a court. Try to keep separate bank accounts for your business as well as ensure that all of your documentation is accurate and up to date at all times.
Sharing is caring
Many small business owners choose to make their spouse a company director as, with a limited company, there are tax savings to be had by doing this. It is, of course, tempting to take advantage of anything that can save or make you a little cash but, beware – this may work against you if the marriage ends in divorce.
As a named company director, your spouse may claim to have had greater involvement in your business than was actually the case – and it’ll be up to you to prove different. You can negate the risk here by making your spouse company secretary or, even just allocating them shares in the business.
Separate business from pleasure
Within a marriage, it’s natural to discuss your day over dinner or a well-earned drink, but it’s important to make sure that your pillow talk doesn’t cost you sleepless nights during a divorce. As hard as it may be, try to avoid talking shop too much with your spouse, as you could end up arming them with ammunition to be used against you during a divorce.
Those little tidbits about your business may seem innocent but may help your spouse to paint a believable picture of their involvement in the company if things go wrong. Instead, try to instigate a ‘switch off’ rule whereby you both leave work behind at a certain time of the evening to focus, instead, on enjoying one another’s company.
A lover, not a fighter
When going through a divorce, you’ll almost certainly have to hire the services of a solicitor. Make sure that you shop around to find a solicitor who is skilled at finding non-confrontational resolutions to make the process easier for both you and your spouse. A great solicitor will be able to help you negotiate every aspect of asset division – including your business – without resorting to aggression or dirty tactics.
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Think Your Business Will be at Risk During Your Divorce?
Going through a divorce is never going to be pleasant. In many cases, it can turn out to be a long, drawn-out, stressful affair. The division of assets is an inevitable part of this process, and you need to accept that you may not get everything you want once the dust settles.
Having said that, by taking a few steps as outlined in this article, you can protect the business that you’ve worked so hard to build and make sure that the settlement is fair for both parties.
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 your divorce. We are not liable for risks or issues associated with using or acting upon the information on this site.
