This guide outlines how to ensure your divorce process protects your business assets.
According to Diversity UK, there is a record number of women starting their own business, with over 140,000 female owned businesses set up in 2021. Coupled with this, almost 20% of SMEs were led by women, representing a 3% increase from 2020.
Divorce process to protect business
With female entrepreneurs on the rise, and divorce statistics increasing, how can women ensure they get a fair settlement in the divorce process when splitting up from their spouse?
Know your business’s worth
First off, it’s important to know where your business stands in terms of value. In the divorce process, all assets, including businesses will be considered in the matrimonial pot.
The value of your business will need to be determined so ascertain how it should be divided in the context of your other joint financial assets. Take stock of all business debts and liabilities, and look at your financial accounting documents in detail.
A valuer will look at your balance sheet, growth potential and the potential earnings of your business too. Appoint a third-party accountant or business broker and have your paperwork in order ready for the valuation.
Consider the division of assets
In most cases in the UK, the courts will leave a business with its original owner and use other matrimonial assets to compensate the other divorcing party. In some cases, they may decide to divide the shares of the business or even the business income.
Before you suggest or agree anything in the divorce process with your former spouse, look at each asset division scenario carefully and how it may impact you. Also, dividing your business will depend on whether or not your business is co-owned with your ex-spouse or not.
Gain control of your personal finances
Gain control of your money by doing a full cash flow analysis of your future finances. Look at what your regular expenditure will look like now you’re operating individually and make necessary cuts and adjustments to your monthly budget.
Before you sign anything in the divorce process, think about your finances from a tax perspective too. New rules now apply to both spouses and civil partners who are divorcing and separating.
Unlike the previous rules, it is no longer required to transfer all assets within the tax year that you split up. Couples now have three consecutive years following their divorce or separation to transfer assets without having to pay Capital Gains Tax.
Resolve any joint debts
From a personal perspective, remember that you will still be liable for joint debts even when you are divorced. If you can, sort out the debts you have with your spouse before you enter the divorce process, then close your accounts.
In cases where the debt is high and you do not have the money to pay them off, agree on paying a fair portion each. You can safeguard this agreement by transferring your share into a credit card you hold individually, and your ex-partner can do the same.
Verbal agreements can often fall by the wayside as time passes and divorce proceedings begin. Do the same with your bank accounts and make sure you transfer all your income into your own personal account as soon as you can.
Get a copy of your credit report
A simple preliminary step to take in the divorce process is acquiring a copy of your credit report. This can be done easily through a range of different credit reference agencies.
Your credit report will detail your score as well as any negative and positive financial activity linked to and your ex-spouse. Knowing where you’re at credit-wise is always a good move, and even more so in the divorce process.
Look through the fine details to see whether or not your partner’s activities have impacted your report. See if there are any errors too as a poor credit history can affect your chances of buying a new property or renting after your divorce. If there are any inaccuracies contact the credit company so they can remove them.
Conclusion
The most important thing you can do as a business owner facing divorce is to be prepared. Know everything about your business’ finances and your personal finances to stay in control and receive what you deserve.
