Dividing a Business in a Divorce UK
April 2025
When a marriage ends, one of the most complex issues that may arise is how to divide assets, particularly when one or both spouses own a business. A business can be one of the largest assets in a divorce, and dividing it fairly can be challenging. In the UK, businesses are usually treated as part of the marital assets and are therefore considered in the settlement, even if only one spouse has an interest in the business.
This summary provides general information and does not constitute legal advice on any individual circumstances.
How is a Business Valued in a Divorce?
The first step in dividing a business during divorce is to establish its value. This process can be complicated and involves a thorough assessment of the business’s financial health. A business valuation can take into account several factors, including its profitability, assets, liabilities, and future earning potential.
If the business is privately owned, it may be necessary to hire an independent expert or accountant to provide an accurate valuation. This will help both parties and their legal teams understand the worth of the business and how it should be divided fairly.
In some cases, businesses may be valued as a going concern, meaning their ongoing potential to generate revenue is considered. This is important because the value of a business can fluctuate based on market conditions, so a careful assessment of its financial situation is crucial.
What Happens to the Business After Divorce?
Once the business has been valued, there are different ways to divide it between spouses. One of the options is for one spouse to buy out the other’s share. This means that the spouse who wishes to retain their share in (or ownership of) the business would pay a sum of money or give up other assets to the other spouse in exchange for them relinquishing their share or interest.
Alternatively, the business can be sold, with the proceeds divided between the two spouses. This can be a suitable option if neither spouse wants to continue operating the business, or if it’s difficult to assign an equitable value to the business without liquidating it.
In some cases, both spouses may agree to continue running the business together. This can be a viable option if both parties have a shared interest in success of the business and are able to work together amicably. However, this arrangement can be difficult to maintain without proper agreements and communication in place.
What Are the Legal Considerations When Dividing a Business?
The key legal consideration in dividing a business is to ensure that the overall settlement in which that division takes place is fair. It may be riskier to keep a share in a business over a share in a property, but there may also be a greater opportunity for future earning potential. The parties need to consider not only how dividing the business will impact them immediately, but also how that will impact their future financial positions.
The court’s aim is to achieve fairness, but what makes a fair outcome will include considering factors such as the length of the marriage, the contributions made by each spouse, and the future needs of both parties. For example, if one spouse has contributed significantly to the business’s success, this may justify their taking a larger share of it.
It is also important to note that if the business was built up during the marriage, it is usually considered a marital asset, even if one spouse has been the sole owner or operator. However, if the business was owned before the marriage, or received as an inheritance, it may be treated differently.
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