A leading family solicitor has warned that divorce can have a significant impact on couples who own a business together.
Gurdip Brring, partner at Worcestershire law firm mfg Solicitors, said divorce is already a difficult time for families, but when a business is involved it can bring additional complexity, as its value is likely to be considered a matrimonial asset and form part of a financial settlement.
She said: “There are three key considerations to be aware of when dealing with a business in divorce proceedings. Those are its valuation, liquidity and tax consequences. Each can have an important role to play in understanding the overall value of the business and how it may be taken into account when reaching a final financial settlement.
“Before a business can be considered as part of the matrimonial assets, it must be independently valued. This is a necessary exercise, as getting a clear understanding of the value of the business can establish how it should be considered alongside the other matrimonial assets and liabilities.
“Consideration must also be given to liquidity and whether there are sufficient funds available within the business to facilitate a settlement or buy out one spouse’s interest. It’s also important to think about the potential impact this could have on the business’s liquidity and cash flow, as well as its ability to continue trading and generating an income.”
Ms Brring added that tax is another important factor to consider when looking at how funds might be released from a business. Depending on the circumstances, extracting cash can result in significant tax liabilities, so taking appropriate expert advice from the outset can help establish the most tax-efficient way of releasing funds.
If readers would like more information on Family matters, please contact Gurdip Kaur-Brring at mfg Solicitors at [email protected].
mfg Solicitors has offices in Worcester, Birmingham, Kidderminster, Bromsgrove, the Black Country, Ludlow and Telford.