Keeping your SME afloat during separation and divorce

SMEs are the backbone of our economy in the north west. Firms like these are often a family affair with couples, grown-up children and extended family working side by side. 

When things are going well, the ownership and passion that drive SMEs forward is a powerful force. If family relationships break down, things can rapidly deteriorate to the point where productivity is impacted. 

However, it doesn’t have to be this way. Here are my top tips for SME owners going through separation and divorce. 

Whilst my tips outline the ideal way to go about things, if your spouse is unwilling to cooperate with you then it’s imperative to seek early legal advice. 

Keep it professional

You may be tempted to end your spouse and/or in-laws’ involvement in the business immediately, but this can cause more problems than it solves. 

If your spouse, partner or extended family member is an employee, they have rights regarding the termination of their employment. Ignoring this can add complications to the process of reaching a financial agreement and create an atmosphere of acrimony and mistrust. If they perform a vital role in the enterprise, they may be difficult to replace at short notice.

Stop and think. Unless their actions amount to serious misconduct that would warrant disciplinary action, maintain the status quo.

Keep talking and be patient

There are many different ways of dealing with business assets on divorce. 

It is unusual for both spouses to continue long-term as employees and/or shareholders, but the process of bringing that connection to an end may be lengthy and subject to all kinds of considerations including tax, liquidity and your wider financial circumstances. 

Keep the lines of communication open during this interim period; it may last a long time.

No matter how amicable the situation, it can take many months to negotiate a settlement and commit it all to paper for approval by the court. 

Don’t expect a quick deal and make sustainable plans for what will happen day-to-day in the short to medium term.

Be transparent

Even when both spouses are shareholders or partners, it is not uncommon for one party to have a clearer idea of how everything works. 

In other cases, one party may focus on the finances while the other is developing contacts or concentrating on the core business.

Just because you are across the details does not mean your spouse is so whatever your role, don’t keep your spouse in the dark. 

This can cause a climate of suspicion and uncertainty, which can undermine attempts to reach agreement. 

Be forthcoming and comprehensive in response to requests for information and clarification. 

Take advice

There can be quick wins for CGT planning depending on the timing of your separation and divorce. Take early advice from a family lawyer and/or tax professional, ideally before separation has occurred.

  • To read this feature in full and access further Lancashire business news, advice and analysis subscribe to Lancashire Business View magazine or join the LBV Hub from just £2.50 per month. Click here to subscribe now.

Enjoyed this? Read more from Elspeth Kinder, JMW Solicitors

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