For business owners, risk management is second nature, yet one threat is often overlooked: the breakdown of a relationship. The emotional and financial impact of divorce or separation can be profound, but with proper legal advice, much of this risk can be mitigated.
Married couples in the UK fall under the Matrimonial Causes Act 1973, which gives courts wide discretion to divide assets based on fairness and need. This means that even if a business was established before the marriage, its growth during the relationship may be considered a matrimonial asset and subject to division.
The business owner’s dilemma
Consider a scenario where a business owner marries a partner who later gives up their career to raise children. Over time, the business thrives. Upon separation, the owner may feel the business is solely theirs. However, courts often view contributions like childcare and household management as part of the joint marital effort. In long marriages, a 50/50 split is a common starting point.
This can be a shock to business owners who assumed their enterprise would remain untouched. The reality is that without legal safeguards, even pre-marital assets can be drawn into the settlement.
Protecting businesses and assets
There are measures you can put in place to ensure the needs of all parties are met. Prenuptial or postnuptial agreements are invaluable tools for setting expectations and protecting assets. While not legally binding in the UK, courts increasingly uphold them especially if they meet the following criteria:
Signed well before the wedding
Both parties received independent legal advice
Full financial disclosure was made
The agreement is fair and meets the needs of both parties
A well-drafted prenup can specify how business assets will be treated, preserving pre-marital equity and outlining how future growth will be shared.
For unmarried couples, cohabitation agreements can outline financial arrangements and property rights. Though not legally binding, they are persuasive in civil court and can prevent costly disputes.
Timing and transparency matter
Legal planning should begin before moving in together or getting married. Waiting until separation is often too late. Agreements should be reviewed regularly, say every five years, or after major life events like having children or acquiring new assets.
Transparency is key. Courts look favourably on couples who clearly documented their intentions and contributions. This includes keeping separate bank accounts, avoiding unnecessary mingling of assets, and maintaining clear records of business roles and income.
Third parties and business structures
If your business involves other partners or family members, things get more complex. Shareholder agreements, partnership structures, and corporate governance documents may need to be reviewed and updated to reflect potential risks from a partner’s future claims. Involving a?corporate solicitor alongside a?family solicitor?ensures that both personal and business interests are protected.
Valuations and hidden costs
Separation often triggers the need for expert valuations of businesses, pensions and properties which can be expensive and timeconsuming. Tax considerations also need to be considered. Legal fees, actuaries and financial advisors may all be required.
Finding workable solutions
Not every separation needs to end in a courtroom. Options include:
Kitchen table discussions: informal agreements between parties
Mediation: facilitated negotiation with a neutral third party
Resolution Together: one solicitor advising both parties
Arbitration: binding decisions made privately
Solicitor negotiation: the most common route, offering legal advice and advocacy
These methods can preserve relationships, reduce costs, and lead to more satisfactory outcomes.
Final thoughts
Protecting your assets isn’t a sign of distrust, it’s a sign of maturity. It’s about ensuring both parties understand their rights and responsibilities, so they can build a future with confidence. Whether you’re entering a new relationship or already in one, if you own a business, legal advice is essential. Protecting your legacy, your livelihood, and your peace of mind starts with a conversation – and the sooner, the better.
For trusted advice on family legal matters, contact Jo on 01434 603656 or joanne.grey@cartmells.co.uk
This column is intended to provide general information only and does not constitute nor should it be relied upon as legal advice.