If you run a business with your spouse and are going through a divorce, alongside all the other issues, your business is likely to be uppermost in your mind. Particularly if you live ‘above the shop’, so to speak. Ending a relationship can be fraught with difficulty, but the thought of ending a business that also provides a roof over your head is complex. Here, we answer some of the most frequently asked questions.
If you run a business with your spouse and are going through a divorce, alongside all the other issues, your business is likely to be uppermost in your mind. Particularly if you live ‘above the shop’, so to speak. Ending a relationship can be fraught with difficulty, but the thought of ending a business that also provides a roof over your head is complex. Here, we answer some of the most frequently asked questions.
If you have concerns about your divorce and you feel you need legal advice, contact specialist family solicitor Mark Heptinstall of Slater Heelis Solicitors. He is recognised as a ‘Leading Individual’ in The Legal 500 and ranked in Chambers UK, and is described as having “the amazing ability to bring calm into troubled waters”.
What happens to a business in divorce?
As you’d expect, there is no template approach to dividing either matrimonial assets or a family business because each case will turn on its own facts. Depending on structure and ownership, the business is likely to be, at least in part, treated as a matrimonial asset and this includes any business premises you may live in. Where possible, assets allowing, the court will try to ensure the business remains with the original owner, but even where a business predates the marriage, the other party may still be entitled to a share of it.
Why is the business considered a matrimonial asset?
Businesses are considered in the same way as the family home, savings, and property. The law sets out that all matrimonial assets are divided in an equitable way, with all assets including a business, considered during settlement negotiations. This will include any business premises, including those you may also live in as your family home.
Many spouses don’t work in the family business, but they may have supported its owner in their role as ‘homemaker’ and taken care of the children while the other it built up. This is the reason a business is considered matrimonial property and gives both parties an interest in it as an asset.
How are business assets valued?
The valuation process can be complicated and will depend on factors such as earnings, assets, the business structure, whether it is a limited company or partnership. Valuing a business can be expensive and time consuming, with prices often running into thousands of pounds. The importance of seeking expert advice cannot be stressed enough if you are to be certain your assets are secured.
A specialist independent accountant should be hired in order to avoid biased and inaccurate valuations, or at least accusations of it, from your ex-spouse. This tends to happen when the business’s existing accountant has been called upon to provide their opinion, which often leads to legal challenges from the other side.
Various factors that contribute to a business valuation include (but are not limited to):
- Standard of living provided by the business
- Income generation
- Ownership of assets or property
- Company pension structure
- Evaluation of other shareholders with varying interests
Will I have to move out of the home we use as business premises during the divorce?
Both parties have the legal right to remain in the family home, regardless of whether the business and its assets are owned jointly or in one party’s sole name. However, if one party has suffered from domestic abuse, the offending party can either be removed by the police or prevented from living there for the duration of the divorce proceedings under the terms of an occupation order.
What can I do to protect the family business?
There are a variety of ways to protect a family business, such as entering into a pre-nuptial or post-nuptial agreement or drafting documentation in accordance with company law reflecting how the shares in the business are held and by whom. The extent to which such measures protect a business differs on a case by case basis.
Practical steps to prevent challenges when the family home is also the business premises
When the family home doubles as your business premises, the interaction between personal and commercial life means that what might have been a straightforward divorce with typical issues such as who stays where and who takes what becomes highly contested. Here are our tips on how to approach this strategically.
Document everything early
One of the biggest mistakes couples make is assuming that informal understandings or agreements will survive a divorce. In reality, everything gets scrutinised, so early in the process you should:
- List assets and liabilities clearly: Include all parts of the business including equipment, intellectual property, and any property used for business purposes.
- Record contributions: Whether this is time spent managing bookings, clients, bookkeeping, or physical renovation, clear records of who did what and when can influence how assets are viewed.
- Separate business from personal receipts: This helps avoid disputes later about what legitimately belonged to the business and what was personal expenditure.
Taking these steps early prevents accusations of hidden assets and reduces costly disputes later.
Get independent valuations
One of the central battlegrounds in cases where the home and business intertwine is valuation. Each party may have a different view on what the business, and the premises, are worth.
Instructing independent experts to value the property and business early can help defuse this:
- Get valuations from experienced accountants or surveyors who specialise in business and property valuations.
- Get multiple valuations if possible to identify any differences.
- Document business income trends, contracts, and forecasts.
The courts are more likely to respect independent, professional valuations, especially where business assets are complex and intertwined with the family home, as opposed to a kerb-side valuation that fails to consider these crucial aspects.
Consider mediation before court
Going to court is both expensive and emotionally draining, but mediation allows both parties to negotiate a fair division of business and property.
In mediation, you can:
- Explore creative solutions such as one partner buying out the other’s share over time.
- Agree on who continues running the business, and how profits or sale proceeds are shared.
- Include non-financial terms, such as children matters without commercial interference.
Mediation doesn’t prevent later court intervention, but it often leads to more amicable, cost-efficient outcomes.
Structure your business separately where possible
Couples considering business ventures should think ahead and structure the business in such a way that it is separate from domestic matters.
Approaches include:
- Forming a separate company (rather than a sole trader setup), with clear shareholding percentages.
- Drawing up shareholders’ agreements that detail what happens on a divorce, retirement, or buy-out.
- Defining roles and responsibilities formally, instead of relying on unwritten arrangements.
This is not foolproof, but it provides a contractual framework that can be interpreted more easily by the courts and solicitors.
Protect assets with prenuptial/postnuptial agreements
While not appropriate for every relationship, prenuptial or postnuptial agreements that cover business interests and premises can provide clarity and protect both parties’ expectations.
Good agreements should:
- Specify how business interests will be treated on divorce
- Deal with valuation methods
- Outline how long a spouse must have contributed to the business before gaining certain rights
These agreements are more likely to hold if they are entered fairly and both parties obtain independent legal advice.
To bring these concepts to life, here are three scenarios many couples with home/business premises may face:
- Customer-facing businesses at home
Jane and Mark run a bespoke furniture business from their home. Customers visit to view pieces, and there’s a workshop and showroom space in the ground floor of the house.
Key issues:
- The business is partly a retail operation with footfall, which may affect valuation
- Customers visiting the premises blur the line between personal use and commercial use
- Business branding uses the home address
Potential action steps:
- Separate business and personal insurance — this not only protects against liabilities but documents the commercial aspect.
- Prepare client visiting logs and profit allocation — accountants can separate personal use areas from customer focused spaces.
- Explore relocating the business as part of the settlement — perhaps one partner takes the business and offers a long lease to the other for the home portion.
Because part of the home is commercially used in a visible way, its value may be influenced by business viability, not just residential value. In these types of case, professional valuations are essential.
- Internet-only businesses run from home
Alex runs a successful online consultancy from the couple’s home. No clients physically visit, but all expenses such as broadband, utility costs, computer equipment are incurred there.
Key issues:
- Determining what proportion of the home’s value is business-related versus residential.
- Explaining to the court that the business’s commercial presence doesn’t materially detract from the home’s use.
Potential action steps:
- Document home-office use — square footage, time devoted, and how revenue is generated.
- Show that the physical premises are not essential to service delivery — digital businesses are often mobile and can be operated from an alternative address.
- Provide profit and loss statements showing the intangible nature of the business asset.
Because there’s no footfall or commercial alteration to the property to allow it to operate, the focus shifts to separating the residential value from business accounts. This is another reason independent professionals are crucial.
- Admin in the home; client work elsewhere
Sophie manages the invoicing and scheduling at home, while her spouse, Tom, performs all client work at external sites. The business is significant and profitable.
Key issues:
- Sophie’s contribution is administrative but essential; how should that be valued?
- Tom’s external work sites hold much of the business activity, yet the administration happens from the home.
Potential action steps:
- Prepare detailed records of administrative hours and contributions
- Clarify revenue streams tied to client work versus more general office tasks
- Negotiate compensation or share allocation that reflects both tangible work and the use of the property
This scenario highlights that business contribution isn’t only physical or property-based — time and management are real economic contributions.
Avoiding pitfalls and preparing for success
When your family home also functions as your business premises, a divorce combines the challenges of separating personal and commercial life.
Conflict can be reduced by:
- Documenting roles and contributions clearly
- Using independent valuations
- Considering mediation and expert negotiation
- Putting formal structures in place early
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