What does divorce mean for my business?
April 2023 – You are a business owner and are running into a divorce privately? Fortunately, this does not have to mean the end of your business.
Divorce is always complex and painful, but all the more so if you are an entrepreneur. After all, you then have to ensure the continuity of your business and come to an agreement with your ex-partner, who in some cases is entitled to a share of the cake.
Among other things, there must be a decision on:
- the ex-partner's future in the case
- the assets to be divided
- the arrangement around the accrued company director's insurance, the VAPZ and other pension pillars.
Of course, there is a big difference in complexity between a partnership and a sole proprietorship. We discuss them successively below.
Divorce in case of sole proprietorship
In the case of a sole proprietorship, there is no one-size-fits-all approach. Much depends on the hw legal system the entrepreneur is married under (community or separation of assets) and the arrangements made in the marriage contract regarding the allocation of shares and membership rights. If you are married under a community system, then the income from the sole proprietorship falls under the joint assets. In that case, the ex-partner is basically entitled to half of those assets upon divorce.
Divorce in case of a partnership
For spouses married under a community property regime, there is a legal split between membership rights in shares and the asset value of those shares. Thus, just because the shares are in your name does not mean that the asset value belongs entirely to you.
Unless the entrepreneurial spouse has contributed his or her own funds in full payment for the shares registered in his or her name when the company was formed, the asset value of the shares will accrue to the community. Upon divorce, an arrangement should be made in this regard. In principle, the entrepreneurial spouse must pay half of the capital value of the shares to the other spouse.
Conclusion
Business owners often do not wonder how everything is legally settled between the spouses until a divorce. One then often encounters unpleasant surprises. A mediator can then help to defuse sensitivities and settle practical and financial matters smoothly. Your accountant can also assist you in this respect.
