It is often the case that businesses, particularly small and medium-sized businesses, are owned jointly by spouses. In many cases, both spouses are involved in the business on a day-to-day basis. Indeed, there are many legal firms where the partners or directors are married to each other.
There are, however, many occasions where a spouse is a joint owner on paper only. The most common reason for doing this is to obtain a tax benefit. At Miller Samuel LLP, we have come across a number of instances where business owners have received advice resulting in them making a spouse a joint partner or shareholder.
This is often sound advice, and can be advantageous from a tax point of view. However, it can create significant difficulties in the event that the marriage breaks down.
If you are a business owner and are considering placing your company into joint names with your spouse, we would urge you to be wary and to take proper advice, including family law advice, before doing so. There are certain points to bear in mind, which can give you some protection. The following are some of those points:-
- You can enter into an agreement with your spouse (a post-nuptial agreement) recording what is to happen to your spouse’s share of the business in the event of separation.
- If you intend to make your spouse a joint shareholder in the business, you can retain control of the business by giving him or her a minority shareholding.
- You can enter into a written partnership or shareholder agreement. That can restrict your spouse’s interest in the business and can prevent dissolution of a partnership business on separation.
There are other steps which can be taken, depending upon your particular circumstances. However, failure to do anything can result in significant distress upon separation or divorce. For example, if a spouse is an equal shareholder and, following separation, all of the company’s dividends are paid into your own bank account, you will almost inevitably have to account for half of these payments to your estranged spouse. Understandably, this can come as a considerable shock to business owners upon separation, particularly where they do not seek advice until some considerable time after separation.
For more information about divorce, business and family law in general, please contact Charles Brown on 0141 221 1919 or This email address is being protected from spambots. You need JavaScript enabled to view it. .
