If you are getting divorced while (both of you) are partners in a general partnership, you face many questions. Quite apart from personal emotions and interests, you also have a business interest: the survival of the company. What should you pay attention to?
Prenuptial agreement or community of property?
Are you married under (limited) community of property or under marital agreements? With prenuptial agreements, those agreements may provide that the assets and debts of the business are kept out of the community. In that case, the value of the business does not have to be divided upon divorce. But beware: has a so-called periodic settlement clause been included in the prenuptial agreement, but you have not settled annually? Then there may still be a community of property.
Were you married before January 1, 2018 without a prenuptial agreement? Then you are married in full community of property and (the share in) the vof falls into the community. Its value will therefore have to be divided or settled. This is also the case if you married after January 1, 2018 without a prenuptial agreement and the vof was started during the marriage with common assets. Indeed, under the law, you are then married in a limited community of property.
Complicated? Please feel free to contact us. We are happy to answer your questions.
How much is your business worth?
If the value of (the shares in) your company is to be divided or settled, you must first have a business valuation performed. Different calculation methods are used for this. It is important that you get advice on the calculation method that is most appropriate in your case. For this you can consult an accountant or valuation specialist. Should you not have these specialists in your own network, we have our own network of specialists.
Also get proper advice on the buyout arrangement. It is important that the liquidity and continuity of the company are not jeopardized by the buyout. Fortunately, you can be flexible about this. For example, it is possible to agree on payment in installments or to pay an adjusted alimony amount, should the buy-out amount not be immediately available. We will be happy to advise you on this.
Alimony
The calculation of spousal and child support is partially based on the income of the person paying the support. For someone employed, that income is usually quite straightforward to determine. However, for an entrepreneur, it’s different: the revenue of a business can vary from year to year or even from month to month. Additionally, most entrepreneurs periodically set aside a portion of their net profit to pay off debts and make investments. This, of course, affects the entrepreneur’s private income, and therefore the amount of support. You can also come to us for advice and calculations on this matter. Our lawyers specialize in spousal support issues and child support calculations.
Pension
If you get divorced, by law you are mutually entitled to half of the pension accrued during the marriage, unless you agree otherwise in the prenuptial agreement or divorce covenant.
Entrepreneurs usually build up their own pension: the pension is then often in the company. Even then, your partner is entitled to half the value of the pension. It is possible to make customized agreements about this. Since this can have tax consequences, we recommend that you seek legal and tax advice on this.
Note: a general partnership together?
It may also be the case that you are in the business together with your partner (a so-called husband-wife firm). In that case, your divorce need not prevent the continuation of the general partnership. Do you decide to continue the business partnership after the divorce? If so, you may want to consider whether you need to make further arrangements about the partnership and record these arrangements. After the divorce, some things may no longer be as obvious as they were during the marriage.
Does one of you also quit the business after the divorce? Then there are tax consequences and the remaining partner must find another partner or continue the business as a sole proprietorship.
Whatever you choose to do, the person who quits the business in principle will have to be bought out. It is important that you seek the advice of an accountant or other – preferably independent – expert in this regard.
It may also be that you both want to quit the business. Then you can sell the business and divide the proceeds. But you can also choose to dissolve the partnership and divide the community.
Or joint venture with others?
If you have a general partnership with your partner and one or more others, you will need to consult with the other partners about continuing the general partnership after the divorce. If one of you quits the business after the divorce, or if you both quit, there could be major (financial) consequences for the other partners. Do the remaining partners choose to continue the business? Then the exiting partner will have to be bought out.
