In brief
In a divorce involving a sole proprietorship, it must be assessed whether the assets and liabilities of the business fall within the community of property and how the business should be valued.
- In the case of a community of property, the assets and liabilities of the sole proprietorship generally fall into the community and must be divided or settled.
- With a prenuptial agreement, the sole proprietorship may have been kept outside the community, but an unfulfilled set-off clause can still lead to a settlement.
- The valuation of a sole proprietorship requires insight into turnover, results, and goodwill; an accountant is often brought in for this purpose.
- The fluctuating income of a freelancer requires a specific approach when calculating Alimony.
- Freelancers generally build up less pension; in a divorce, equalization of the pension built up during the marriage applies, unless other agreements have been made.
Does your sole proprietorship fall within the community of property?
Whether the sole proprietorship is involved in the division depends on the matrimonial property regime:
Community of property
In a full or limited community of property, the assets and liabilities of the sole proprietorship fall into the community. The business value is determined and included in the division of assets. The starting point is that the business can be continued after the divorce.
Nuptial agreements
With a prenuptial agreement, the sole proprietorship may be excluded from the community. Please note: a periodic set-off clause that has not been complied with annually can still create a settlement obligation.
How is a sole proprietorship valued?
The valuation of a sole proprietorship depends on the nature of the business, the turnover, the results, and the existing goodwill. In many cases, an accountant is hired to determine the value. Key points of attention include:
- The extent to which the turnover is personal—goodwill that is not transferable often does not count towards the valuation.
- Investments in business assets made during the marriage using communal assets.
- The question of whether the business remains financially viable after the buyout.
Alimony for a freelancer
The calculation of Alimony for a freelancer differs from that of an employee. A freelancer’s income can vary from year to year and even month to month. Usually, an average is taken over several years based on the annual accounts. Depending on the circumstances, the fiscal income and any tax deductions are also considered.
Pension for a freelancer
Freelancers generally build up less pension than employees. If you have built up a pension during the marriage, equalization generally applies: the ex-partner is entitled to half of the pension built up during the marriage. Different arrangements can be made regarding this in the divorce settlement agreement.
Based on Real Cases
In one case, Simmelink Lawyers assisted a freelancer during a divorce where turnover had risen sharply in recent years. The question was which income year should serve as the basis for the Alimony calculation. By carefully analyzing the turnover development and taking fiscal deductions into account, a well-founded calculation could be made that was accepted by both parties. Every situation requires its own assessment.
Written by Carla Simmelink, family law attorney at Simmelink Lawyers.
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Frequently Asked Questions
Whether the sole proprietorship falls into the division depends on the matrimonial property regime. In a community of property, the assets and liabilities of the business are included in the division of assets. With a prenuptial agreement, the sole proprietorship may fall outside the division, unless a set-off clause has not been complied with. Depending on the circumstances, a legal assessment is necessary.
For the Alimony calculation, a freelancer’s income is determined based on the average profit over several years, as shown in the annual accounts. Incidental benefits and deductions are assessed for sustainability. Depending on the circumstances, the fiscal income is also taken into account. This is general information, not individual legal advice.
In a divorce, pension equalization generally applies: the ex-partner is entitled to half of the pension built up during the marriage. Freelancers do not always build up a pension through a pension scheme; in that case, there is nothing to equalize. Parties can make other agreements about the pension in the divorce settlement agreement.
In principle, yes. In the valuation and the buyout arrangement, the starting point is that the business can be continued after the divorce. The buyout arrangement must not jeopardize the liquidity and continuity of the business. Depending on the circumstances, payments in installments can be agreed upon.
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