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Helen Noble

Associate Solicitor - Sevenoaks

24th January 2017

Keeping the family business out of the family break up

When a marriage or a civil partnership ends, working out what amounts to a fair settlement can be difficult, particularly if a business is one of the assets to take into account.

This can be further complicated by the way the business is set up and who the owners are. Not only might the financial interest in the business have a capital value but also the business may be producing an income stream, whereas some businesses only produce an income stream and the value may be in the goodwill.

So what will happen when a business forms part of the family assets to be shared at the end of a marriage or civil partnership? Will the business have to be sold?

If at all possible a Court will avoid ordering a sale of a business. Sometimes it may not be practical to order a sale where third parties are involved as shareholders or partners in the business. It may be that the business produces the only source of income to support the separating couple and any children they may have. In such circumstances it would not be sensible to see the only source of income disappear. Having either agreed with your spouse or civil partner the value of the income stream and the capital value of the business or having had a formal valuation, the Court will strive to achieve a fair outcome which recognises the value of the business to the future financial security of the separating couple and their children.

In considering a fair outcome the Court will also take into account factors such as whether the business has been inherited or in the family for years.

It is important to take legal advice early to discuss what steps you can take to preserve business assets and minimise potential tax liabilities which could arise on the transfer of a share in a business and other assets at the end of a marriage or civil partnership. It is also sensible to consider whether you and your spouse or civil partner can reach an agreement through negotiation, mediation or the collaborative law process to avoid costly Court proceedings, which ultimately eat into the assets you may be trying to protect.

For further information please contact Helen Noble, solicitor in our Family department at our Sevenoaks office on 01732 448164 or emailing helennoble@rixandkay.co.uk

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