Without the right measures in place to protect your business, your ex-spouse could receive a payout or shares for part of the business during the divorce, even if they’ve had no part in building it.
Your ex could argue about the level of their contribution to the business. For example, they may have been named as a director purely for tax purposes, but argue that they contributed actively to the success of the business. Your former partner can also make a case for providing support at home or in family life, which helped you to concentrate on growing the business. If this happens, you could face a large payout or even lose a part of your business.
3 tips for divorce-proofing your business
1. Keep family and business finances fully separate
You need to maintain a clear separation between your personal and business finances. This means no buying anything for personal use as a business expense, and having a completely separate bank account to the one you share with your spouse.
You may also want to think about the access your partner has to your business. Obviously, many couples appreciate the support of their spouse and aren’t usually planning for situations where they separate, but it can still be good practice to keep your partner at arm’s length when it comes to the company. If they aren’t actively involved in the business, it can be much simpler to avoid having detailed business discussions with them, or have them assist in hosting business events. This will also mean they can’t claim to have contributed more than they have if you do divorce.
2. Sign a prenuptial agreement
This agreement will clearly identify the business as a separate property from you and your family, which may give it added protections in case of divorce. While not legally binding in England and Wales, many courts will try to uphold the terms of a pre-nuptial agreement as long as they are fair, both parties sought independent legal advice and financial disclosure was undertaken at the time.
3. Seek professional legal advice from a specialist
Even if there are no problems in the relationship, it’s still a good idea to speak to a specialist solicitor about organising your business affairs. The earlier you can understand potential risks in the future and put measures in place to protect the business, the better.
If any cracks do start to emerge in your marriage or civil partnership, and you’re worried about how separation could affect the business, don’t hesitate to seek legal advice. Getting good advice at this early stage could stop you from making costly mistakes.
If any of these issues concern you, get in touch with Liverpool divorce lawyer Tracey Miller Family Law. The team has over 25 years collective experience in all aspects of family law and can help with everything from pre-nuptial agreements to meditation during divorce.