When a long term relationship ends, the couple’s assets will usually be divided equally between them. Ownership of a business is considered to be an asset and will therefore need to be divided amongst the partners. This can be a difficult process and can often mean the business does not survive. There are three different options available in a separation when dealing with a business:
1. Sell the business
The best way to ensure that each partner gets exactly half of the current value of the business is to sell it and split the proceeds. This is the common way that other sorts of property are divided, for example the family home. There are downsides to this option. If the business is very small or relies on the expertise of one of the divorcees, then it may have next to no market value or could be impossible to sell. In this case, selling the business would not be the best financial decision.
2. Buy your partner out of the business
Both partners agree on the value of the business by way of a valuation. One partner will then buy the other partner’s half share in the business. This is a good option when one partner is more invested in the business than the other. Usually a lump sum payment is made to the bought out partner – this obviously requires the buying partner to have enough cash to make this payment.
3. Continue with joint ownership
Where both partners wish to continue running the business then joint ownership is a valid option. In this case, no legal changes will be made to the business – it will operate as normal. It could also be arranged such that one partner runs the business and the other satisfies their ownership right by way of payments from the business. This option is only really realistic when the separation is amicable – there must be a working relationship in order to continue with joint ownership of the business.
If you have any further questions about relationship property or separation contact Jeremy Sutton Barrister to book a one hour consultation.
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