Dividing business interests when you separate if you were living together

If you’ve lived together as a couple without marrying or entering a civil partnership, and you separate, you don’t have an automatic right to make a claim on your ex-partner for a share of any business interests.

But you might be able to make a claim in court for compensation if your ex-partner won’t honour commitments they’ve made if:

• you’ve run a business together
• you were promised a share in it, or
• you’ve contributed to it financially.

In England or Wales, you would need to show you had a ‘beneficial interest’ in your ex-partner’s business.

In Scotland, you would need to show you’ve suffered what’s called ‘economic disadvantage’ or that your ex-partner has gained an ‘economic advantage’. An example would be if you stopped working to look after children so your ex-partner's career could carry on. You would have one year to do this from the date of your separation.

Making a claim could be expensive. So it’s worth getting legal advice before you begin any court action.

You might also need to arrange a business valuation. This can be complicated, and could cost thousands of pounds.

Before paying for experts, it’s a good idea to get some legal advice on this too.

If both of you own the business, either of you can arrange a valuation.

Generally, if one of you owns it – outright or with others – they have to ask for the valuation.

The process might not be straightforward, especially if the business is privately owned.

Valuing a business might depend on:

• its assets – for example, property or stock that it owns
• its earnings – the profit it’s expected to make in future, and
• the structure of the business – whether it’s a limited company, sole trader or partnership.

There are different ways to structure a business.

If you’ve been involved in the business, you’re likely to know the difference between them. But if it’s your ex- partner’s business, you might not know how the business has been set up.

Here’s a quick overview.

• Sole trader: the owner controls the business assets, but they’re also legally responsible for any business debts. The income and profitability are the most important figures, but business assets – for example, premises or vehicles – might also be taken into account.
• Partnership: this might be an informal partnership, with no written agreement, or a formal one. If other people – apart from you or your ex-partner – are involved, valuing it will be more complicated and you’re more likely to need expert help.
• Limited company: as with partnerships, valuing a limited company will be more complicated if other people have a stake in the business. If you or your ex-partner own all the shares, it might be relatively straightforward to value.

Couples who are separating might not always agree about how much a business is worth. This is especially true if one partner has had much less involvement in it.

Sometimes, the business owner might appear to undervalue their business (possibly dramatically).

It’s worth bearing some things in mind:

• Using experts to help you get a true value of the business can be expensive. Some people have spent thousands of pounds on specialist accountants.
• The business might have taken a turn for the worse recently. Just because the business was doing well last year or the year before, doesn’t mean it’ll be doing well now.
• Business owners can be optimistic about their own business and you might have been led to believe it was much more profitable than it really is.

To avoid lengthy and expensive court action, you and your ex-partner could try mediation to resolve your differences over how to divide shared business interests.

A mediator is an independent person who can help you and your partner reach an agreement. They can’t give you legal advice, but you can talk to a a solicitor (if you have one) before or after mediation sessions.

Your solicitor would advise you how to turn anything you’ve decided into a legally binding agreement.