As
\na business owner, it is almost certain that you will encounter tough times,
\nwhether due to a dip in revenue, a loss of key staff or an economic recession.
\nBut one of the greatest – and most unsuspecting – challenges to a business
\nowner is divorce. <\/p>\n
Once
\nyou’ve fallen in love with your partner and built a life and family together,
\ndivorce is not one of those things you anticipate, plan or want to be privy to.
\n
No-one can predict how a relationship will turn out and risk should never stand
\nin the way of happiness and the fulfilment a marriage can bring.<\/p>\n
However,
\nwith 42% of marriages ending in divorce, it can happen to the best of us,
\nparticularly if you’ve taken your \u2018eyes off the marital ball’ and been putting
\nin long hours at work. If handled poorly, divorce could result in you having to
\nsell your business as it may be a valuable marital asset to meet both parties’
\nneeds.<\/p>\n
A
\ncommon misconception is that a business is a separate legal entity, hence it
\nwill not be touched when couples divorce. This is not always the case. Value of
\nshareholdings in businesses can be considered and form part of the \u2018matrimonial
\nassets’ to be divided and distributed upon divorce, especially if the business
\nwas created during the marriage.<\/p>\n
Getting
\nspecialist advice on the necessary legal, fair and reasonable documentation and
\nlegal steps to take at the outset of marriage is therefore important. Simple,
\ndiligent forward-thinking can help ensure that your business remains as intact
\nas possible upon divorce.<\/p>\n
So,
\nwhat can you do to better safeguard your business?
1) Consider a prenuptial or postnuptial agreement <\/b><\/p>\n
Entered
\ninto before or during a marriage, these contracts address how marital assets,
\nincluding ringfencing business shareholding and assets, are dealt with and
\ndivided on divorce. Such agreements are not enshrined in legislation in the UK
\nand there is no absolute guarantee of protection. However, a well drafted prenuptial
\nor postnuptial agreement following the necessary guidelines is highly advisable
\nas they provide some clarity, certainty and also peace of mind whilst keeping
\ncosts and legal disagreements to a minimum upon divorce. <\/p>\n
2) Create a
\nshareholder’s or partnership agreement if you share ownership of the business
\nwith your spouse <\/b><\/p>\n
This
\nis a contract clearly setting out what will happen to a business if disputes or
\ndivorce occurs and protects the interests of both parties. You can also agree
\nrestrictive clauses preventing a departing spouse from setting up in direct
\ncompetition, sharing confidential information or stealing clients.
3) Invest in a good insurance policy <\/b><\/p>\n
Invest
\nin a whole-life insurance policy that can be liquidated to buy a spouse out of
\nthe business if the marriage hits the rocks, giving you some peace of mind and
\ncertainty of funds. <\/p>\n
4) Keep your business
\nand household expenses entirely separate <\/b><\/p>\n
Scrupulously
\nmaintain good records by carefully documenting and avoiding intermingling
\npersonal assets with business assets. Avoid the use of the family home to
\nsecure borrowing within the business. <\/p>\n
5) Consider sharing
\nownership of your business with outside sources<\/b><\/p>\n
A
\n100% spouse-owned business will generally be treated like any other matrimonial
\nasset on divorce, namely divided or shared, unless there are good reasons not
\nto. However, where a business is jointly owned with other shareholders or
\npartners, the court is less likely to take steps which might potentially damage
\nthe livelihoods of the other such stakeholders.<\/p>\n
If
\nyou haven’t had the foresight to do these things that’s completely
\nunderstandable. The key of a happy relationship is to build a lifetime of
\ntogetherness and you may not have considered the possibility of a breakup. <\/p>\n
As
\nsuch, there are a few things that you can do at the last minute to come to the
\nbest settlement possible if you are faced with a divorce.\u00a0 One useful strategy is to agree to trade some
\nof your other personal \u2018liquid’ marital assets that you are prepared to let go of
\nwith the \u2018illiquid’ business ownership you want to keep. <\/p>\n
Despite
\nthe possibility of divorce, there is no doubt how invaluable a marriage –
\nchoosing to start a family and creating a life with your partner – can be for
\nyour personal happiness and professional development, too. <\/p>\n
Entrepreneurs
\nneed grit, creativity and a huge amount of drive and commitment, something than
\ncan often be aided by a loving partner. Life is unpredictable, but you
\nshouldn’t use the risk of divorce as an excuse not to make the commitment to
\nsomeone you love. The focus should be on creating a happy fulfilling marriage
\nin the first place and enjoying the joint hard work of building a lifetime of
\ntogetherness and completely bypass the damaging route of divorce. <\/p>\n
For more information \u00a0<\/b><\/p>\n<\/div>\n
\nvisit www.sheelamackintoshstewart.com<\/a><\/b><\/p>\n
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