Navigating a business sale after divorce

Selling a business is complex enough at the best of times, but during a divorce, the process can become even more challenging. At a stressful time when you may be desperately seeking a clean break, the last thing you need is a drawn-out business sale that brings additional pressure and the potential for disputes. 

So, what are your options? When selling a UK business after divorce, the most appropriate route will depend on your specific circumstances. It’s often the case that a business is owned and managed by one spouse, while the other is not involved at all. However, many married couples also run a business in partnership, which creates a different set of issues. 

Regardless of your situation, if you’re approaching a business sale during or after a divorce, here are the key considerations and best practices to help you navigate it successfully. 

Do you have to sell a business after divorce?

Not necessarily. In many cases, selling the business may not be in either party's best interests. If the business is the primary or sole source of household income, continuing to operate it can help to ensure the financial stability of both individuals after the divorce. 

In this case, it may be preferable to explore alternatives to selling the business. Other options you may wish to consider include:   

• Co-ownership - both parties could continue to co-own the business with clearly defined roles, responsibilities and a profit-sharing agreement
• Buyout options - One spouse may agree to buy the other out following a professional valuation
• Deferred sale - You may decide to continue running the business while it grows and becomes more profitable, before selling it for a higher sum

The key is to evaluate all your options rather than assuming that selling it immediately is the only way forward. Selling could impact employees and trigger repayment obligations and fees. That said, it may also be the best option for resolving ownership disputes and enabling a fair and timely division of assets.

What is the process for selling a UK business after a divorce?

If you want to sell a jointly owned business after a divorce, or a company run by a single spouse, there are some important considerations. It’s not simply a case of putting it on the market and hoping for the best. There are several steps you can take to maximise the business’s value and minimise conflict.

Seek legal guidance

The first step is to seek legal guidance from a divorce solicitor with experience in business ownership. They will help you understand your options and whether the business is considered marital property. 

Sole proprietorships, partnerships and limited companies are all treated differently in divorce, and the structure of your business can impact the division process and the potential sale strategy. 

Obtain a professional valuation

Establishing a fair market value is rarely straightforward, particularly when one spouse is not involved in the day-to-day running of the business. Differing levels of insight, expectations and personal attachment often mean each partner has a very different view of what the business is really worth.

That’s why, if you decide that a business sale during the divorce is the best way to proceed, the next step is to get a professional business valuation. Courts, solicitors and financial advisers generally rely on an independent valuation to ensure fairness.

The valuer will consider the assets, revenue, growth potential, client contracts and market conditions to establish an accurate picture of the business’s worth. That will help to ensure the sale is well-informed and that each party receives their fair share. 

Timing is everything

Due to the circumstances, it can be tempting to push the sale through as quickly as possible. However, taking a little extra time can often enhance the business’s value, for example, by waiting for outstanding customer payments to come in or for key contracts to be finalised.
Securing a new long-term client agreement, renewing an existing contract, or finding a new tenant for a business property can all increase the company’s attractiveness to buyers and strengthen its market value.

Engage a business transfer agent

A business transfer agent or broker is a professional who specialises in the acquisition and sale of established businesses. They will be able to assist you with the practical aspects of selling a business after separation.

They will provide an independent, professional business valuation and guide you through the key aspects of the sale, including:

• Preparing the business for sale - Taking simple steps, such as ensuring documentation is up to date, preparing clear financial reports, performing minor repairs and tidying up internal and external areas, can make a big difference to the business’s saleability and the price you achieve.  
• Marketing the business - Experienced transfer agents will create detailed sales listings and advertise your business extensively on and offline, and to their established networks of buyers.
• Handling due diligence - Potential buyers will want to review financial statements, client contracts, employee agreements and ensure the business is legally compliant. An agent will help you manage these enquiries, organise the necessary documentation and respond promptly.
• Negotiating the best deal - When you receive an offer, transfer agents can advise on their competitiveness and negotiate on your behalf. Beyond the headline price, you must consider factors such as payment terms, transition support and any non-compete agreements to structure a deal that best meets your goals.
• Support throughout the transaction - Once you have accepted an offer, business transfer agents work with you, the buyer and your solicitor to progress the deal towards completion. 

Consider the tax implications

It’s essential to consider the tax implications when selling a business during a divorce. 

Capital Gains Tax (CGT) is generally payable on any profit you make (the sale price minus the base cost). However, Business Asset Disposal Relief (BADR) can reduce the CGT rate to 10% for qualifying gains, provided certain conditions are met, including minimum ownership and involvement periods. Timing the sale to meet these requirements can minimise your tax liability.

The way the sale is structured can also have a significant impact. Choosing between an asset sale and share sale can influence both the tax outcome and the ease of dividing the proceeds between spouses. 

You should also consider the distribution of funds to maximise the available reliefs and allowances so both parties achieve the best possible financial result.

Expert business sales support during divorce

Whether you want to sell a jointly-owned business as part of a divorce or liquidate a company owned by a single spouse, Eddisons Business Sales is here to help. We provide independent divorce business valuations and can guide you through the sale seamlessly while actively working to maximise your business's value. 

Find out more about selling your business, including our sales process, and get in touch for a free, confidential consultation with our team.