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Six Great Tips if Getting Divorced and You Own a Business
The number of people owning their own businesses or working for themselves is growing. In July 2022, there were approximately 4.29 million self-employed workers, according to Statista. This leaves many people with lots of questions about divorce. In this article, we outline six top tips if you’re about to get a divorce and have your own business.
Don’t try to hide assets
Matrimonial assets are financial assets involved in the divorce settlement process. These assets may be the family home, a company pension, or investments. Business assets are also included, but moving these around can be problematic, especially if one of the spouses is trying to reduce the value of the business by doing so. The court will not take a positive view of this and consider it dishonest to give your partner less than what they deserve in your divorce. You could end up paying more.
Getting divorced and own a business: take out a pre-nuptial agreement
Taking out a pre-nuptial agreement may feel counterintuitive if you are about to marry. But if you have your own business or are an entrepreneur, it is certainly worth your consideration. In your agreement, you can specify precisely what happens to your business and its related financials in a divorce. Although pre-nuptial and post-nuptial agreements are not legally binding, the courts are becoming more open to considering them when assessing financial settlements.
Separate domestic and business finances
To safeguard your company, it’s a good idea to keep finances related to it separate from other marital, financial assets. For instance, if you have previously used funds from the equity in the family home, this will make things more complex when calculating whether or not your business should be considered in the martial pot. Similarly, don’t put any personal expenses through your business, as this can also make things complicated and result in a less favorable divorce settlement.
Do not let your spouse become involved in the business
Difficulties can lie ahead with businesses due to the ambiguity of involvement with one of the spouses. If a business owner has their spouse as a director for tax efficiency purposes, this could lead to that spouse making a case for having a higher financial claim on the business in a divorce.
It’s therefore advisable to keep your business as separate from your marriage as possible by now making your spouse a company directory or company secretary if you want to safeguard your business in a divorce.
Pay yourself a good salary from the business
When you first set up a business, it is a common approach to make financial sacrifices (for example, paying yourself a small salary in the beginning) to, later on, reap the benefits.
However, suppose you are not taking out a reasonable income from your company. In that case, a former spouse may then be able to make a case that they are now entitled to more assets from your company because you used the martial income to build the business. Paying yourself a reasonable salary can reduce this possibility in the event of a divorce.
Getting Divorced And Own a Business: Use a family lawyer who will encourage a quick resolution
It is always advisable to seek the legal expertise of a family lawyer if you are a business owner considering divorce. When you begin your initial consultations, make sure you gain an accurate picture of all the timescales involved.
Although businesses can add to the complexity of your divorce, they can often be relatively straightforward, especially if you have come to an amicable agreement with your ex-spouse.