Divorce is a stressful time, and when a business is involved, it inevitably has an impact on all aspects of your life; particularly your financial assets and the business itself. For any business owner in Lancashire, going through divorce and deciding how to split the business can be a tough experience. Whether it is a small, medium-sized or even part of a large group, it is important to weigh up the pros and cons of what to do with it.
Pros of Splitting up a Business During Divorce
1. Clear Financial Independence
Perhaps the most obvious advantage of splitting a business in a divorce is that it makes it possible for both parties to be financially independent. After a divorce, it can be difficult to separate the personal emotional baggage and collaborative experiences of a marriage from a shared business. Splitting the business allows both spouses to move forward on their own terms, with less likelihood of future conflict or disagreement over how the business is run, who gets how much of the profits or how decisions in the future will be made.
2. Simplifies the Divorce Process
If the business is active and both parties are still involved in operations, a split makes the dissolution of the marriage simpler, as it eliminates the need for continued post-divorce collaboration on the business. A clear and clean split of assets and the business can help expedite the divorce process, saving both time and money.
3. Avoids Ongoing Conflict
For some couples, continuing to co-own and/or co-manage a business following divorce isn’t feasible because the emotional tensions can interfere with effective business collaboration. Splitting the business takes that possibility off the table. Each spouse gets to run his or her own business, neither needing to compromise or negotiate with the other spouse over how the business will be run.
4. Opportunity for a Fresh Start
It has been argued that divorce is a chance for a new beginning – both personal and professional. For the spouse who feels suffocated or otherwise unhappy about the existing business partnership, splitting the business can be an opportunity to explore new career prospects, whether starting a new business, or accepting a new position, or even moving abroad. Given the dynamism and variety of business in Lancashire, splitting the business may be a chance for growth in the future.
Cons of Splitting up a Business During Divorce
1. Potential for Financial Loss
One of the biggest financial risks involved in splitting up the business is the potential loss in value. If the business has to be sold or divided, it might not sell for what it’s worth (especially if it’s sold in a rush or if the business heavily relies on the spouses working together). On top of this, the emotional impact of divorce could have a negative effect on the business, making it less profitable or valuable, and leaving both parties with less than they might have otherwise.
2. Emotional Impact on Employees and Clients
The breaking up of a business in Lancashire is not just a matter of shareholders and directors. In a typical local business, close relationships with employees and clients are formed. So news of a split will have an impact on those affected. Will your service or product still be provided at the same level? Do you trust the business to still be there in a few months? These uncertainties could lead to employees to leaving, or clients to taking their business elsewhere.
3. Complicated Legal and Tax Issues
The division of a business during a divorce can involve both complex legal and tax considerations. Not least is how the business is valued and how its value is split. For instance, who gets what and how? What returns are achievable on those assets? And how much will the tax man take? In Lancashire there are regional tax codes and regulations to consider.
4. Loss of a Successful Partnership
It’s common for businesses to thrive when couples have complementary skill sets and strong, aligned goals. As one divorce lawyer explained to me: ‘The way the business grew for years was due to the synergy between the two spouses, and they should think twice about breaking this synergy.’ If both spouses are crucial to the company’s success – the ‘glue’ that holds it together – breaking up might hurt the company’s long-term prospects, especially if one of the partners lacks the business acumen or the contacts the other brought to the table. Some businesses might be better off exploring options for maintaining a type of professional partnership that can continue after divorce.
Alternatives to Splitting a Business
Be sure to consider alternatives to a split, such as using marital funds to purchase out the other’s share or remaining business partners even after the divorce. If the appropriate level of emotions can be maintained, and the success of the business is a mutual priority, continuing to operate together should be considered, even in a different role.
Conclusion
A divorce in Lancashire is always a difficult moment for everybody, especially if it is about splitting up a business. On one hand, it will give both sides financial independence and a new chance for a better life. On the other hand, there are many negative consequences for both parts, such as financial losses, negative influence on company’s employees, and a possibility of litigations. So, couples need to analyze all the pros and cons carefully, consult with legal and financial advisers, and think about all possible scenarios before making a final decision.
