What Happens to a business you built before marriage?
30th March, 2026
Going through a divorce is an extremely difficult and life-changing period of your life. It can be even harder to deal with if you and your spouse own or run a business together.
Owning and running a business with your spouse requires clear boundaries, defined roles and a shared long-term vision to ensure your success. However, when your romantic relationship breaks down, you may worry about what will happen to your business and what the divorce process will look like as you consider both business assets and the future of your company.
Whether your business was a pre-marital asset or if it was built during your marriage, our divorce solicitors at Ward Hadaway are specialists in providing legal advice and support to ensure you and your spouse receive a fair share of the business assets and to protect your work going forward.
Running a business with your spouse
Owning and running a business with your spouse comes with positives, like shared goals and motivation and increased financial efficiency. However, working so closely with your spouse also poses several risks and challenges which could impact your business. If your personal relationship breaks down and you file for divorce, your professional relationship is likely to be damaged too, leaving you with questions about the future of your business.
If your relationship breaks down, you and your spouse may be looking at achieving amicable divorce to ensure the best interests of one another – and your business – moving forward. Understanding your assets and the impact of divorce is essential, especially as you navigate splitting business assets whilst maintaining continuity for your employees, clients or customers.
Understanding whether your business is a non-matrimonial or matrimonial asset
Dividing a shared business is an extremely complicated aspect of divorce. The potential sharing of your business will be impacted by the type of asset it is classed as, and the individual circumstances of the case. It might be a business that was established long before the relationship commenced. It might be a business that was inherited by one of the parties, or it might be a business that has grown significantly after the parties have separated and mainly down to one parties efforts.
Non-matrimonial asset
Sometimes known as a pre-marital asset, a non-matrimonial asset (in the context of business assets) is a business asset owned solely by one spouse prior to the marriage or civil partnership, or inherited like a family run business. It is not seen as being a product of the joint marital partnership. It has derived from an external source (brought to the marriage) and has been kept separate.
However, what originated as a non-matrimonial asset can essentially convert into a matrimonial asset for the purposes of divorce and financial remedy proceedings through “matrimonialisation”. The matrimonialisation of assets can allow a business to become part of the shared marital asset base, making it subject to division in divorce in some circumstances. This process of matrimonialisation happens when the asset is pooled with joint marital funds or openly treated as part of the couple’s shared finances over time, regardless of its initial status. Non-matrimonial assets are not subject to automatic sharing on divorce, instead they will be looked at if the needs of the parties require them to be. If the matrimonial assets are sufficient to meet needs, there is a good chance that the non-matrimonial asset will be retained by the spouse who acquired it.
Matrimonial asset
A matrimonial business asset, or marital asset, is any company, partnership or business started, acquired or significantly grown by either spouse during the course of a marriage. These businesses are generally considered as shared property and will be subject to division upon divorce, regardless of the name on the title.
If both parties contribute to the business, for example, as company directors with equal shares, the split can be more complex. If the divorce is amicable, both parties may be able to carry on in their roles as business partners, but if a desirable solution cannot be achieved, one spouse could sell and transfer their shares in the business to their ex-partner, or to a completely new director or business partner. Should no solution be reached, both partners will either need to sell the business or ask the court to determine the outcome.
By working with expert divorce solicitors, you can be assured that you will reach a fair and mutually agreeable divorce settlement.
When might you have a claim even if you weren’t hands-on in the business?
There’s no need for a spouse to be a director or shareholder in a business in order to be entitled to a share of what will be considered a matrimonial asset. Family law treats a marriage or partnership as a joint enterprise and considers all contributions to family life as equal. There is no advantage in being the main income earner or disadvantage in being the lesser income earner or homemaker under the Matrimonial Causes Act 1973.
If the business was started or grew significantly during the marriage, even if only one spouse worked in it and the other had no formal role, your indirect contribution is recognised. If you made indirect or non-financial contributions, like primary responsibility for childcare, running the household, supporting the business-owning partner emotionally or practically, or relocated or made lifestyle sacrifices to enable business growth, the court will treat your contributions as equal to financial or business input.
These situations are complex and specialist legal advice from divorce solicitors is recommended to align with your personal circumstances. If you are uncertain of whether your contributions are relevant and you have a suitable claim, obtaining legal advice is strongly recommended.
How are businesses valued in divorce?
Businesses may be in the form of one party being a sole trader, the parties or a party being in a partnership or in form of a limited company. If the business/partnership/sole trader is purely an income stream for the family, with limited assets, a formal business valuation is unlikely to assist and be required. It is unlikely that a sole trader business would need to be valued as the assets are likely to be the tools of their trade.
If the business or partnership shows substantial profits and turnover and significant capital assets, its likely to require a formal business valuation. There are a number of methods that can be adopted.
The business can be valued on a net asset basis, and this will provide a minimum value. It won’t be suitable in all cases, but it can provide a guide value. In addition to attributing a value to the tangible assets, adjustments may be made for goodwill, and an uplift for assets at market value and not the accounting value as per the accounts. This might require an adjustment to the net assets recorded in the balance sheet to arrive at the correct value.
The business may be valued on an earnings basis. The valuation is arrived at by identifying a level of earnings representative of the business, comparing earnings of similar businesses, for which market values are known and applying a multiple of the representative earnings. Any potential purchaser of the business is buying the potential future earnings and cash flow of the business. The valuer will consider the current performance, likely future performance and historical performance of the business to establish the sustainable level of earnings as part of the valuation exercise.
Where the requirement is to value a small proportion of shares owned by a spouse, as opposed to the whole of a company/business, the dividend yield basis is used. The method interprets the return available to an investor in terms of the dividends payable from the business and capitalises this at a required yield. Where the income received has been consistent it’s possible to value the shares by reference to the level of dividends likely to be received in the future. Applying dividend yield percentages from similar companies identifies the capital value.
Ultimately, protecting your family business from fallout whilst ensuring you receive the correct assets during divorce is priority during this process.
What can happen to a business if a relationship breaks down?
A relationship breakdown between a couple who own or run a business together can lead to operational disruption, financial strain and potential legal battles over ownership. The business could be split between both partners if they can agree on how to move forward, part-sold to another individual or, in extreme cases, sold completely if partners are unable to agree on a settlement.
The court will, unless agreement is reached as to value, assess the value of a business through the instruction of an appropriate expert. However, the value of a business is not the same as the value of cash. Fairness dictates that when the court is tasked with distributing the marital asset base and achieving fairness it does so by providing each party with a proportionate share of the liquid and illiquid assets.
Where shares are owned in a company, the court may order their transfer, often from one party to the other when they both own shares. It may in some circumstances be appropriate to transfer shares from one owner to the other even when they do not already own shares. This might be where it’s been hard to determine the value of the business or estimate future liquidity.
The court can order the sale of shares in a private limited company, but it is rare that a court would take such a step. The main reason being that the business is generally the family income producer, and a sale might terminate future income.
In most cases a clean break is desirable, as separating parties don’t relish ongoing business ties post-divorce. One party will generally retain the business and the other might receive a lump sum payment either in full or in part payment/instalments to reflect the interest in the business.
If a party is keen to have ongoing involvement in a business even post separation and divorce, it’s possible, but it would be wise and necessary to obtain robust corporate law advice on how that relationship would progress. Shareholders agreements would need to be in place to protect that ongoing relationship.
How Ward Hadaway’s divorce solicitors can help
Dealing with the division of a business you own or run with your spouse can make the divorce process extremely complex and often, each situation is different. Considering who gets the business is not a straightforward process, and at Ward Hadaway, we understand that it can make divorce proceedings complicated. If a prenuptial agreement or postnuptial agreement was entered into, the court would adhere to agreements reached in these documents on how to deal with business assets in the event of separation or divorce, so long as they are done properly and considered fair. Nuptial agreements are a way of avoiding uncertainty in relation to a business asset in the event of separation
From hidden assets and divorce to understanding pensions and divorce when business assets are involved, our divorce solicitors are here to support and guide you with care and compassion through this difficult time.
Contact us to see how we can advise you.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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