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Analysis: The impact of a divorce on a business

Date:19 FEB 2019
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When couples decide to divorce, aside from settling the arrangements for any children of the family - the next burning issue is how best to divide the family finances, according to Zoe Porter, partner and head of family law at Ashfords

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The assets accumulated during a marriage may involve a business, which undoubtedly adds a whole new level of complexity. In some instances both spouses may be involved in the building or the running of a business. Equally both may wish to remain actively involved after divorce. In other circumstances, one spouse may have established a business interest prior to a marriage, or indeed inherited it. Either way often the main income of one or both of the parties is generated by those business interests.

How should the court deal with the business interest? Firstly, the court must establish what value should be attributed to the business. Secondly the court will then consider how to deal with that value along with all of the other assets available to be shared between the parties.

The value of the business can be a hotly disputed issue between the parties. Often there appears to be a decline in the business when a relationship breaks down - much to the suspicion of the other party if they are not actively involved in its day to day running. The value is therefore crucial to the negotiations and any order that a court is likely to make concerning the division of the other assets. The court will need to be able to consider the liquidity of the business so that it has in mind what could be withdrawn in order to pay the other party.

So how is the business valued? Where possible it is preferable to jointly instruct an accountant. A professional single joint expert valuation in this way is more likely to be accepted by the court then a value placed on the business by one of the parties. Experts assistance is also vital to understand the tax implications of any possible changes to the business structure as a result of a divorce.

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