What happens to a business in a divorce?

Does a business count as a marital asset?

Yes. In England and Wales, a business you or your spouse have an interest in is treated as a financial resource. That means it must be disclosed and taken into account when considering a fair settlement, alongside the family home, pensions, savings and other assets.

If you’ve spent years building a company, the thought of it being divided can feel deeply unsettling. It’s one of the most common concerns we hear from business owners, and the reality is often less alarming than people fear.

A persistent myth is that the courts simply leave a business out of the equation. But it’s equally untrue that your spouse will automatically walk away with half your company. What happens depends on the value of the business, the income it produces, and how that fits into the wider financial picture.

The court will also consider whether the business is matrimonial or non-matrimonial:

• Matrimonial: A business started or grown during the marriage, often using shared time, money or effort. This usually forms part of the pot to be divided

• Non-matrimonial: A business owned before the marriage or acquired through inheritance or a gift. This isn’t automatically shared, though it may still be considered if it’s needed to meet the other person’s housing or income needs

In practice, the line between the two often blurs. A company you owned before you married may take on a matrimonial character if it grew significantly during the relationship, or if your spouse was involved in some way. Getting clear on what you’re entitled to in a divorce settlement is a helpful starting point for making sense of your overall position.

Limited company

A limited company is a separate legal entity, run by its directors on behalf of its shareholders. In many family businesses, the directors and shareholders are the same people, often a husband and wife, structured that way for tax efficiency.

This is where things can become more nuanced. Because directors decide when profits are paid out as dividends, the income an owner appears to take may not reflect what the company could actually pay. The court will often look at what profits could be drawn, not just what’s currently being taken.

Where unconnected third parties also hold shares, their position has to be respected too, which can limit how the company is dealt with in a settlement.

It’s worth being realistic about the limits of these valuations. Many are simple exercises rather than the rigorous due diligence you’d see in an actual sale. Where one party suspects the figures don’t tell the full story, a standard valuation may not dig deep enough.

Tax also plays a significant role. The potential Capital Gains Tax on a sale or transfer can materially affect the net value of each party’s interest, so it should never be an afterthought. There’s real nuance in how to value a business for divorce purposes, and understanding the mechanics can help you see what your interest is truly worth.

This is one reason why Stowe has an in-house team of forensic accountants, who scrutinise disclosure and investigate concerns about accuracy, particularly where business or offshore interests are involved.

If you need advice for dividing your business in a divorce, reach out to our team for more information.

How can I protect my business in a divorce?

No business is automatically ring-fenced from divorce, but sensible planning, ideally before any difficulty arises, can reduce risk and help preserve what you’ve built.

If your livelihood and the security of your employees depend on your company, wanting to protect it is entirely natural. The most effective protections include: