Business and divorce: protecting your future

For many couples, a family business represents years of hard work, personal sacrifice and long-term commitment. If you are facing divorce and own a company, it is natural to ask: what happens to the business?

Justin Creed, legal director and family law solicitor at Lodders, explains how, with the right advice, it is possible to protect both your company and your financial future.

Is your business considered part of the divorce? 

In England and Wales, all assets owned by either spouse can be considered in a divorce settlement – including business interests. How a business is treated depends on when it was started, who owns it and whether it was inherited. For example:

• Businesses started or grown during the marriage – these are usually considered matrimonial assets and may be shared.
• Pre-existing or inherited business – these might be treated as non-matrimonial property, although they can still influence settlements if they supported the family lifestyle.

Courts focus on fairness rather than a strict 50/50 split. They consider both financial contributions and the non-financial effort, such as running the household or supporting a spouse’s career. 

How businesses are valued during divorce

Valuing a business is rarely straightforward, especially when it comes to small, owner-managed companies or when income depends on one person’s skill. A joint professional valuer, often a forensic accountant, is usually appointed to provide a neutral assessment. They examine: 

• Assets and liabilities
• Profitability and cash flow
• Market position and goodwill
• Future earning potential

For a business where the owner’s personal reputation drives value, the court recognises that not all of the business can realistically be divided. This makes tailored advice essential. 

Options for dividing or preserving business assets 

Contrary to popular belief, courts rarely order the sale of a business. The goal is usually to maintain operations while ensuring fairness. This could be done by:

• Buyouts and offsetting other assets- one spouse may buy the others share outright, or the business owner may retain the company in exchange for a larger share of other assets, like property or savings. 
• Deferred payments and structured settlements- payments spread over time can help preserve cash flow whilst providing financial security to the other spouse. 
• Shares transfers and minority interests- in some cases, a minority shareholding is transferred, although this is less common where relationships are strained.

Protecting your business before divorce 

Discussing divorce before marriage may feel uncomfortable, but taking proactive steps early on can help protect both partners and reduce complications if circumstances change. You might want to consider the following measures: 

• Prenuptial and postnuptial agreements – these agreements set out how business assets should be treated in case of divorce.
• Shareholder or partnership agreements- clear rules on share transfers or spouse involvement can prevent disputes later. 
• Trusts and company structures- ownership structures can provide clarity, protect the business and safeguard other stakeholders. 

These measures don’t guarantee outcomes, but they reduce uncertainty and provide reassurance for business owners. 

Every business-related divorce is different. Some couples choose to continue as business partners after separating, while others prefer a clean break. Focusing on fairness and practicality usually leads to the best outcomes – protecting both your livelihood and future security. 

The importance of seeking early legal advice

Dividing a business in a divorce is complex. Seeking early advice ensures your interests are protected. 

A specialist family lawyer can: 

• Work with accountants and valuers to fully understand your financial position
• Help structure settlements in a tax efficient way
• Advise on disclosure while maintaining confidentiality
• Explore mediation or private financial dispute resolution to avoid costly court proceedings

Lodders regularly advises business owners, company directors and professionals on divorce and financial settlements. Working alongside trusted accountants and valuers, we aim to protect the value of the business while ensuring a fair outcome for both parties. 

If you are facing divorce and your business is part of your finances, early, confidential advice can make all the difference. Contact our experienced team to understand your options and protect your future.