Following our review of succession planning for family businesses, (click here for previous article relating to Protecting Business Partners) I felt that it is also important to look at other unexpected issues that may affect a family business.
For many people who run a family business, their focus is to secure the business by running it in a commercially and tax efficient manner. Sometimes, running a business in the most tax or commercial efficient way results in decisions being made that can impact the future of the business. It may be that shares are passed to a spouse or businesses are restructured for tax purposes. This could potentially lead to the loss of ownership of a long-held family business in the event of a divorce. Whilst no one enters into marriage (or co-habitation) with the intention of divorcing or separating in the future, it is an unfortunate reality that these things do happen.
In all cases I would recommend that, where one of the parties to a marriage (or co-habitation) is a major shareholder or partner in an existing family business, the individual considers the possibility of entering into a pre-nuptial agreement. This could protect and ring-fence the assets of the family business which were acquired before marriage.
Similar provisions apply to any business re-organisation. In such a re-organisation, you should consider not only the tax implications but also the family law issues which could arise as a result of the consequence of that re-organisation in the event of a divorce.
In these circumstances, I work closely with our Family Law Team [add link to family pages] to ensure that clients can get specialist family advice, which can have a major impact on their business and commercial concerns.
If you have any concerns or would like to discuss a matter relating the the above article, please get in touch with us.