The family court will hope to protect a family business from becoming too involved in a divorce, to avoid the business having to be broken up or sold off to realise enough to pay the court determined settlement.
Alternatively, one of the divorcing couple may have to buy out the other if they have a share in the company, or liquidate assets to achieve the same outcome. All of which can be messy and time-consuming, often negatively impacting the performance of the company.
Another option that may be explored is offsetting: that is, where one spouse receives a higher share of the other available assets in order to preserve the business.
Many businesses do not have the spare capital or assets to liquidate that could help achieve a clean break, and the resultant pressure to sell will typically signal the end of the business – which can be considered by the courts.
It is not uncommon for newly divorced partners to have to work together until the business can be sold, which brings a whole new series of challenges – to achieve the maximum sale price will need the pair to work successfully together and make jointly beneficial decisions.
Determining the value
Whether or not your business will be valued within the divorce depends on whether it would have a substantial value if sold.
If it is deemed to have no real value then it may not be included; however, successful family-run businesses will be considered an asset as part of the divorce and valued within the process.
Of course, different types of businesses will be subject to their own unique valuation process. Partnerships are merely income streams, and if there is no underlying capital value or nothing to sell within the business, then it is only the stream that matters, and this may be dealt with as a maintenance issue.
If one spouse owns the business outright, then an in-depth valuation process will be required, at which point it is wise to consider consulting an experienced family lawyer for advice with the next steps.
Where it is important for a business to be valued, an expert accountant will undertake a valuation on behalf of both parties, known as a single joint expert.
Rather than having a set procedure for all divorces to follow, there are a range of values that could be obtained and considered by a matrimonial judge if it is deemed necessary, so it is crucial you hire an experienced accountant to help you reach the desired outcome, depending on whether you are hoping to retain the business or not.
The involvement of shares
