Is a limited company protected from divorce in the UK?

Expert advice for limited companies and divorce settlements

Divorce Advice for Business Owners

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If you’re a business owner, it’s highly likely that your company will be considered as part of the financial proceedings when getting divorced or dissolving a civil partnership. Our specialist divorce solicitors have ample experience in dealing with complex matters including protecting your business in a divorce.

At Woolley & Co, Solicitors, we can offer comprehensive guidance, supporting you to handle your business assets when getting divorced or dissolving a civil partnership. No matter what the specifics of your situation, we’ll ensure that you understand your full range of options, helping you to achieve the most favourable outcome.

Our experts can support clients with limited company divorce settlement matters, including:

Protecting your business in a divorce
Business valuation during divorce
Divorce and the family business
Mediation processes to reach a financial settlement
Representation in court proceedings
Pre-and post-nuptial agreements

For a free 30-minute initial chat with one of our expert divorce solicitors, call Woolley & Co on 0800 321 3832 or complete our online form.

What happens to a ltd company in a divorce?

During a divorce, a limited company may count as a marital asset depending on the circumstances. To reach a financial settlement the resources of both individuals are considered and then split based on various factors. These factors may include financial obligations, the needs of each party and their children and the living standard prior to the separation.

If one individual owned the company prior to the marriage, that person can put forward the argument that it should not be considered a matrimonial asset. However, in most cases, the business is likely to be considered a financial resource and its value or income producing potential will be taken into consideration for the division of finances.

This does not mean that the business needs to be sold or that the spouse who did not have a stake in the business will be given one in the divorce. It is more common for the spouse who is not involved in the business to be given a bigger share of other assets, such as the family home, to counterbalance the value of the business. However, other approaches can also be used depending on the situation.

Can my partner take half my limited company?

Theoretically speaking your partners could claim that they are entitled to half of your business if you are getting divorced as will all other assets. In practice, courts are generally reluctant to order individuals to sell their business and split it, especially when there are fairer and more practical options.

A company will likely be considered when reaching a financial settlement, but as mentioned above, it is likely another solution will be found to achieve a fair division of assets. This might include agreeing that you can retain a larger share of other assets or that you will receive regular spousal maintenance payments.

How to protect a limited company from divorce

One way to protect your business during a divorce is to use a pre-nuptial or post-nuptial agreement which establishes what will happen to the company if the relationship breaks down. These agreements can be used to state that the company will not be included as part of the divorce proceedings or determine how the business should be divided.

Many people do not set up a pre-nuptial or post nuptial agreement before they get married and when they come to get divorced it is too late to do so.

The best way to protect yourself during a divorce is to get in touch with a divorce solicitor. They can advise you on your options and guide you towards the best way of protecting your business in the UK.

Business valuation during divorce

If your business is considered a marital asset during divorce proceedings, it’s essential to obtain a precise valuation before reaching a financial settlement. Without an accurate valuation, your spouse may later have grounds to pursue additional financial claims.

Typically, this process involves engaging a professional such as a business valuer or forensic accountant to determine the company’s worth. They may use various valuation approaches, including asset-based, income-based, or comparative business methods.

At Woolley & Co, our solicitors can liaise with accountants on your behalf, taking into consideration various factors while also reviewing the tax implications. We’ve supported many individuals with limited company matters on divorce, so can talk you through all of the issues and give you a clear appreciation of your legal standing. Call 0800 321 3832, or complete our quick online form.

How is a limited company split in a divorce?

Where a divorcing couple own and run a family business together, dividing the business between the two parties can be complicated. Where you are facing this predicament, both parties are advised to gain independent legal advice early on.

Our solicitors can offer expert guidance and support divorcing couples in this situation. There are several options to divide a family business during a divorce, for example:

One individual ‘buys out’ the other
One person takes sole ownership of the business, while the other accepts a maintenance or compensation payment
One party carries on operating the business and transfers shares to the other party
The business is sold, and both parties split the proceeds
Both individuals decide to become shareholders and enter into a shareholder’s agreement

How Woolley & Co, Solicitors can help

Mediation processes to reach a financial settlement

Our family lawyers can help you to reach a limited company divorce settlement as part of your divorce proceedings. We can assist you through a mediation process, supporting you to negotiate with your partner and avoiding a court hearing if possible.

Reaching a settlement can be difficult and there are various underlying factors which must be taken into account. We will ensure that you have all the information you need to understand the procedure and prepare yourself. Together we will work towards the best divorce settlement to suit your needs.

Representation in court proceedings

Under some circumstances, it may be necessary to go to court to reach a financial settlement, particularly if there is dispute regarding your divorce and limited company. We understand that the prospect of a court hearing can feel overwhelming and are here to offer constructive and sensitive guidance throughout the entire process.

Pre-and post-nuptial agreements

If you’re entering into a marriage and you’d like the option of protecting your business interests, we can support you to create a pre or post nuptial agreement. A pre-nuptial agreement is a legal document that’s drafted before you get married. The document outlines how assets would be shared in the event of a divorce. A post-nuptial agreement includes the same information, however, it is drawn up after the couple have married.

When you’re preparing to get married you probably won’t be thinking about the prospect of a divorce. Regardless, making these plans now can help you to protect your future interests and potentially your business if you do get divorced later down the line.

For a free 30-minute initial chat with one of our pre-nuptial agreement solicitors, call Woolley & Co on 0800 321 3832 or complete our online form.

Limited company divorce settlements FAQs

How are businesses treated during a divorce?

During a divorce, a business is treated differently to investments and cash because a company isn’t considered a liquid asset. It can be challenging to extract a cash value from a business and doing so has tax implications.

In a divorce, businesses are usually treated as shared assets, (even if one of the partners has never been involved in the company). Divorce law rules that all interests and assets can potentially be shared, including pensions, investments, savings, the property and businesses.

Is a limited company a marital asset?

Yes, a limited company is often considered a marital asset, the same as property, savings and pensions. Naturally, this is a concerning realisation for many business owners, particularly if you’re going through a high conflict divorce.

Reaching a financial settlement can be difficult, particularly when companies are involved. However, with the right legal support, you’ll have the best chance of protecting your assets, including your business.

Will the court order the sale of a limited company as part of a divorce settlement?

While the court has the power to order the sale or transfer of a spouse’s shares in a limited company, this is generally considered a last resort in UK divorce proceedings, especially in a divorce and limited companies case, if the company is the primary source of income for one party. Courts typically prefer to find a solution that allows the business to continue as a ‘going concern,’ as its ongoing income stream is crucial for meeting the needs of both parties and any children. The court’s usual approach is to seek an offsetting solution, where the business-owning spouse keeps the company and compensates the other party through a greater share of other marital assets, such as the family home or pensions, or via a lump sum payment.

Does it matter if the limited company was established before the marriage?

Yes, it matters, but it does not mean the company is automatically ring-fenced or protected entirely; the issue of divorce entitlement to limited company value remains. Assets that a spouse brings into the marriage, known as non-matrimonial property, may initially be viewed as belonging to that spouse. However, the court will then consider the principle of ‘needs’ and ‘sharing’: if the business has grown significantly during the marriage, that growth is often considered a matrimonial asset subject to division. Furthermore, if the non-business-owning spouse’s needs cannot be met without recourse to the non-matrimonial element of the business, the court can still utilise its value to ensure a fair outcome, particularly in long marriages.

If one spouse retains the limited company, how does the court compensate the other spouse?

The most common method of compensation when dealing with divorce and business assets is ‘offsetting,’ where the value of the shares the retaining spouse keeps is balanced by giving the other spouse a larger share of the couple’s remaining liquid assets, such as cash, investments, or most typically, the equity in the family home. If there are insufficient other assets to offset the company’s value, the court may order a lump sum payment to be made by the retaining spouse, which could be paid in instalments or funded by extracting cash from the business (e.g., via a dividend or share buy-back), or through spousal maintenance payments representing a share of the business assets in divorce ongoing income.

Our limited companies and divorce settlements solicitors in the UK are here for you

A limited company divorce settlement can give rise to many unique challenges, so it’s essential that you access the legal support that you need. Our team can offer expert advice on protecting your business in a divorce in the UK, ensuring that you have the information and legal support to achieve the outcome you deserve.

To take advantage of your free 30-minute consultation with our expert divorce lawyers, call 0800 321 3832, or complete our quick online form.