If you are in the process of a divorce while setting up a new company, concerns about your financial future can multiply. Here are some tips on how to navigate a new business venture with splitting up [1].

What happens to a business during a divorce?

In the UK, the courts typically consider businesses as a matrimonial asset and as such it will be factored into negotiating a financial settlement. Therefore, if your business is already up and running it will almost certainly be taken into account.

When are financial orders made?

If you are going through a divorce, you may already be aware that you will have to initiate divorce proceedings before a Financial Order [2] can be officially granted. If a couple has decided to separate before they divorce, ample time is available for one of the parties to start up a business. While it is understandable that both parties will want to move on with their lives with new goals and financial ambitions, this can leave them open to the other spouse making a claim on the new business even after separation. 

What you can do to protect your new business

If you are keen to get things up and running with your new venture, but are concerned about the financial implications this could have further down the line, a separation agreement can be helpful. This is a formal agreement which sets down what your financial arrangement will look like after you have separated. Not only does it cover businesses but it also outlines who will pay maintenance and when, how a mortgage will be covered and debts managed. The agreement will be used to show to the court when the divorce is through. Post-separation agreements are not strictly legally binding [3], however, if they are contested then, on the condition they are deemed fair and equitable, the courts will uphold them.

What you need to consider when drawing up a separation agreement

To reduce the possibility of your separation agreement being challenged you must ensure that you have disclosed your financial circumstances fully ensuring you have made clear any investments, savings and debts.

Using a mediation service

Some divorcing couples choose to enlist the help of a mediator during this stage of their divorce proceedings. As well as helping you make child care and future living arrangements, they can also help you come to an agreement over specific financial matters. Mediators do not provide legal advice but act as a neutral third party. While mediation [4] isn’t obligatory, if your case ultimately goes to court, you may have to prove that you have tried to settle disagreements through mediation.

Ways to protect your business from divorce

Where possible, it’s best to protect your business interests from the outset.

●       Be mindful of your spouse’s role in the business

If you are planning on starting up soon, be careful about giving your spouse a key role, for example, making them a company director, as this will demonstrate a level of involvement in the business during a divorce.

●       Make sure your finances are as separate as possible

By keeping your business’ assets clearly separate from your matrimonial assets, you will be able to make a clear distinction to the courts between the two. This means, for example, not using equity in your matrimonial property to fund the start up of your company.

●       Obtain a prenuptial agreement

For those with business plans who are not yet married, taking out a prenuptial agreement offers another level of protection. It’s advisable for both spouses to gain legal advice beforehand and ensure the terms within it are fair, with both parties fully disclosing their finances.

In all divorce cases with a company or future company involved, it is advisable to contact a legal professional experienced in divorce and business.