I divorced my business partner – here’s how we protected our company
When James Maguire and his ex-wife Eimear co-founded a law firm they never expected to get divorced. Here he explains how your business doesn’t have end just because your marriage has
When Eimear, my now ex-wife, and I co-founded our law firm – Maguire Family Law, over 15 years ago, I never imagined that the business we built together would be tested by the complexities of a divorce.
We had poured our hearts and souls into it, striving to create something meaningful not just for ourselves but also for our clients. But when we realised that our marriage was over, we didn’t want the business we had created to be another casualty.
Divorce is often described as one of life’s most challenging events and, for business owners, it can carry even greater consequences. The emotional toll is undeniable, but the potential impact on the business – especially for SME owners – can be far-reaching, affecting not just the individuals involved but also employees, clients and future prospects. For parents, this is in addition to managing the impact on children and protecting their wellbeing and best interests.
Protecting your business during a divorce is crucial – and I speak from both personal and professional experience. Not only have I spent over 30 years advising clients through similar challenges as a divorce lawyer, but I’ve also navigated the complexities of divorce with my own business partner.
While personal dynamics may be in turmoil, the business itself can survive with careful planning, transparency, and legal guidance. 12 years later, I’m living proof – Eimear and I continue to run a successful business together, co-parent effectively, and are on better terms than ever.
How do you value a family business?
One of the first hurdles for any business owner facing divorce is the question of valuation. How do you fairly assess the value of something you’ve worked tirelessly to build? The Family Court will require a business valuation in order to determine financial settlements and this process includes assessing assets, income and future earnings potential. However, it’s more complicated than simply putting a price tag on a business. Factors such as liquidity, taxes, and the risks associated with the business must also be taken into account.
For SME owners, this is especially challenging. The business may be intertwined with personal finances, and it’s essential to determine whether the business is a capital asset to be divided or an income source for family finances. In my experience, small businesses are often treated as personal income, while limited companies are more likely to be considered as separate entities.
Without professional legal and financial advice, you risk overvaluing or undervaluing your business, potentially setting the stage for unfair settlements. This could overburden the future operations of the company or fail to account for risks such as tax liabilities or other hidden costs.
So, how can business owners proactively protect their companies in the event of divorce?
Should you get a pre-nup?
First, pre-nuptial and post-nuptial agreements – although not yet legally binding in the UK – can provide clarity and carry significant weight in court. While Eimear and I did not have one, such agreements can be invaluable in setting expectations and clarifying how assets, including the business, will be divided should divorce become a reality. More couples are now turning to these agreements, particularly in cases where inheritance tax planning or asset protection is important.
Trust structures can also separate personal ownership from business assets, though they require careful planning to withstand legal scrutiny. Keeping personal and business finances distinct simplifies valuations and prevents unnecessary disputes.
From a legal perspective, the family court considers several factors when making financial settlements, including the length of the marriage, contributions to the business and the financial needs of both parties. A key consideration is the business’s viability. A pound in the business isn’t always equivalent to a pound in cash due to the risks involved, and courts take this into account.
Clear communication with legal and financial professionals is essential. My experience has shown that with the right advice, a business can emerge from divorce intact. Divorce doesn’t have to mean the end of a business partnership, even if the personal one ends.
In my case, working together with Eimear to ensure the firm’s continued success after our divorce was critical. Though no longer married, we remained committed to the firm’s success, recognising that separating our professional relationship from personal matters helped both of us focus on what mattered most: the business we had spent years building.
We still had the knowledge and complementary skills that had guided our firm since its creation. Having a shared purpose outside of our children helped us to maintain an amicable relationship, keep going on the tough days and continue to work together to grow our business.
James Maguire, founder and managing director at Maguire Family Law, has more than 30 years’ experience in complex family law matters. A Fellow of the International Academy of Family Lawyers, he sits on several foreign embassy panels and is recognised in both Chambers & Partners and Legal 500 directories as a leader in this field.