Breaking Up The Family Business

A separation can have many implications on finances, especially if you have a ‘family business’. Michael Sheville looks at the many factors to consider. If you or your spouse own or are employed in ‘the family business’ and are separating, the value of your business and your standing in it are likely to be important factors  to take into consideration when trying to reach a financial settlement following the break-up of your marriage.

You would need to consider, amongst other things:

• what is the business worth?
• if you work in the business, what effect your separation will have on this and whether you have any employment rights?
• any tax implications in the event one of you leaves the business?
• if you work in the family business and are required to leave, how you will replace the lost income?

How a solicitor can help

In order to assist you in dealing with these difficult issues it would be important for you to collate as much information as you can such as accounts, both annual and management, copies of any budgets and forecasts, copies of Shareholder or Partnership Agreements and valuations of any property that might be owned by the business.This information will assist us in being able to advise you more fully and allow us, if necessary, to recommend the instruction of a forensic accountant to value the business and advise on any other issues such as liquidity and the tax consequences associated with a potential change in ownership.A valuation of a small business will be less likely if in reality the business is the sole income stream of the owner and there are no underlying assets with a capital value. This will often be the case with sole traders or very small businesses operating through a company structure for tax efficiency.

What the Court can do

The Court has a wide range of options in dealing with a family business. The usual order would be for one party to leave the business or be left with business and for the other to be compensated from other assets, but the Court can instead divide the shares or income and this can sometimes be necessary to avoid one person being left with the illiquid assets of the marriage as although the business may have a value it is unlikely that the spouse who retains it will wish to sell the business unless they are retiring.

It would be unusual for the Court to order a sale especially if the owner is effectively sole trading or in a small company and represents his/her own income stream.

Find out more

Pinney Talfourd Solicitors has a large team of experienced family lawyers with significant experience in dealing with issues surrounding a family business in the event of divorce.  Please contact us for a free initial appointment on 01708 229 444 for more information or visit the Family Law page to book an appointment.