Dividing business interests on separation if you were cohabiting

Money Advice Service

If you and your ex-partner were neither married nor in a civil partnership, but have been running a family business together or have shared business interests, you may be able to claim a share in their value. Find out the options available.

Assessing whether you can make a claim

If you’ve lived together as a couple without marrying or entering a civil partnership, you don’t have an automatic right to make a claim on your ex-partner for a share of any business interests once you separate.

But if:

  • You’ve run a business together
  • You were promised a share in it, or
  • You’ve contributed to it financially,

you might be able to make a claim in court for compensation if your ex-partner won’t honour commitments they might have made.

In England or Wales , you would need to show you had a ‘beneficial interest’ in your ex-partner’s business.

In Scotland , you would need to show you’ve suffered what’s called ‘economic disadvantage’ or that your ex-partner has obtained an ‘economic advantage’ – and you would have one year to do this from the date of your separation.

Making a claim could be expensive, so you should take legal advice before you begin any court action.

You might also need to arrange a business valuation.

This can be complicated and, as a result, can cost thousands of pounds.

Before instructing experts, it’s a good idea to get some legal advice on this too.

Read our guide on Your options for legal or financial advice on separation.

Valuing a business

If both of you own the business between you, either of you can arrange a valuation.

Generally, if one of you owns it (outright or with others), they must ask for the valuation.

The process might not be straightforward, especially if the business is privately owned.

Valuing a business might depend on:

  • Its assets, such as property or stock that it owns.
  • Its earnings (namely the profit it is expected to make in the future).
  • The structure of the business: whether it’s a limited company, sole trader or partnership.

Understanding the different types of business structure

There are different ways to structure a business.

If you’ve been involved in the business, you are likely to know the difference between them.

But if it’s your ex- partner’s business, you might not know how the business has been set up.

Here is a quick overview:

  • Sole trader: the owner controls the business assets, but they are also personally liable for any business debts. The income and profitability are the most important figures, although business assets, such as premises or vehicles, might also be taken into account.
  • Partnership: this might be an informal partnership, with no written agreement, or a formal one. If other people – apart from you or your ex-partner – are involved, then valuing it will be more complicated and you are more likely to need expert help.
  • Limited company: As with partnerships, valuing a limited company will be more complicated if other people have a stake in the business. If you or your ex-partner own all of the shares, it might be relatively straightforward to value.

Disputing a business valuation

Couples who are separating might not always agree about how much a business is worth.

This is especially true if one partner has had much less involvement in it.

Sometimes the business owner might appear to undervalue their business (possibly dramatically).

Bear in mind that:

  • Using experts to help you get a true value of the business can be expensive. In some cases, people have spent many thousands of pounds on specialist accountants.
  • The fortunes of the business might have taken a turn for the worse recently. Just because the business was doing well last year or the year before doesn’t mean it will be doing well now.
  • Business owners can be optimistic about their own business and you might have been led to believe it was much more profitable than it really is.

Resolving a dispute through mediation

To avoid protracted and expensive court action, you and your ex-partner could try mediation to resolve differences over how to divide shared business interests.

A mediator is an independent third party who can help you and your partner reach an agreement.

A mediator can’t give you legal advice, but you can consult your solicitor before or after mediation sessions.

Your solicitor would advise you how to turn anything you’ve decided into a legally-binding agreement.

You can find a mediator:

Your next step

Review insurance for dependants and your will on separation

This article is provided by the Money Advice Service.

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Some important information about Rest Less Money

We want you to understand the positives, but also the limitations of using our site. We operate in a journalistic manner and therefore all information, guidance or suggestions provided are intended to be general in nature, and you should not rely on any of the information on the site in connection with the making of any financial decision.

When we set out to build Rest Less Money, we wanted to be a trusted place where you could find helpful information about financial matters affecting the over 50s. As a free to use resource, we try hard to provide the best information we can, but we cannot guarantee that we won’t occasionally make mistakes. So please note that you use the information on our site at your own risk, and we can’t accept liability if things go wrong.

Key things to remember when using Rest Less Money:

We do not offer financial advice – As a journalistic site, it’s important to know that we do not provide financial advice. You should always do your own research before choosing any financial product so that you can be certain it is right for you and your specific circumstances. If you are in any doubt, please seek professional financial advice from a regulated financial advisor.

No Liability – please note that you use the information on Rest Less Money at your own risk and we can’t accept liability for how you choose to use the information given on our site. We will often provide links to content or products and services available on other third-party websites. These are provided purely for your convenience and we cannot be held responsible for any content, or any of the products and services offered on any website that we link to.

 

Accuracy of Information – We try to make sure that all the information provided on Rest Less Money is correct at the time of publishing as we want it to be the most helpful resource possible. Sadly, we are not perfect however, and so we can make no guarantees as to the completeness, accuracy, adequacy or suitability of the information available on the site.
Whilst we work hard to try and provide accurate information, deals and prices can change, so whilst they may be correct at the time of writing, providers may subsequently decide to alter them later – so always double check first.

A final note on the Rest Less Community Forums – always remember that anyone can post their opinion on the Rest Less Community Forums, so it can be very different from our own opinion and may not be factual or well researched. Always be wary of any content posted on the forums and be sure to do your own research and due diligence on anything suggested. 

We hope you find Rest Less Money a useful resource and we would welcome your feedback at [email protected] on how to make it even better. For more information on any of the above you can read our full terms and conditions.

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