Your own business and divorce: what to look out for

A divorce is an emotional rollercoaster and is financially and legally complicated. If one of you owns a business, extra questions arise: what belongs to whom, what is the business worth and what does this mean for the future of the business? I have been an entrepreneur myself for decades and guide divorces in which businesses or shares play a role. In this article I set out the main points of attention under Dutch law.

How are you married?

How assets are divided depends largely on how you are married.

• Full community of property (married before 1 January 2018). Without a prenuptial agreement, everything falls into the community, including the business. In a divorce, its value is in principle divided equally.
• Limited community of property (married from 1 January 2018). Only what was built up during the marriage falls into the community. Assets from before the marriage, inheritances and gifts remain private. It then matters whether the business already existed before the marriage.
• Prenuptial agreement. This often states that the business falls outside the division. What exactly applies depends on the arrangements, such as a settlement clause.

I help you understand these rules. Sometimes we bring in a financial planner or tax adviser; I continue to guide you throughout the process.

The emotions

You cannot settle a divorce properly without paying attention to what it does to you. There is certainly room for that in my practice. Financially, a divorce revolves mainly around three topics: child maintenance, spousal maintenance and the division of assets and debts.

Child maintenance

As partners you can separate, but you remain parents forever. The starting point is that children should be as little worse off materially as possible. The costs of the children are calculated on the basis of what you had to spend together during the relationship. Both parents contribute according to their financial capacity. Fixed calculation rules apply. Read more under finances.

Spousal maintenance

Spousal maintenance is a form of financial aftercare for the former partner. It is temporary and based on the difference in net income. Spousal maintenance only comes into play if there is still financial capacity left after the costs of the children. After all, you can only spend a euro once. Here too, calculation rules apply and there are choices to be made; I take you through the considerations.

An entrepreneur's income

Net disposable income is the basis of all maintenance calculations. For an entrepreneur, and certainly for a freelancer, that is a moving target. Income fluctuates. How do you deal with an exceptionally good or bad year? For me that is familiar territory, and almost always we arrive at a workable approach together.

Dividing assets and debts

People usually agree about the household contents, and often about the surplus value of the house too. As soon as a business is involved, things become more complex. A few questions that then arise:

• Does the business fall within the community or outside it? And what does the prenuptial agreement say?
• What if the entrepreneur has built up a lot of capital in the business and contributed little to the household?
• How do you determine the value of the business?
• How do you deal with a partner who has worked in the business for years without pay?
• And what if the partner is entitled on paper to part of the value, but buying out or splitting is not financially feasible?

So a business can make a divorce considerably more complex. In my practice I have dealt with this many times.

Good support

By being well prepared and bringing in the right legal and financial support, you both know exactly where you stand. Do not forget the tax consequences either. Also read divorcing with a business and divorcing as a freelancer, or more about divorce mediation.

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