What happens to my business when I separate? Top 3 considerations.

If you have separated from your ex-partner and you own a business, you may be concerned about how your business will be treated in your property settlement.

If this sounds like you, here are our top three things you should consider when thinking about finalising a property settlement.

1. Understanding the value of your business

Like any other asset in your property pool, such as the family home or a motor vehicle, your business will have a value.

For example, if you are a sole trader with no employees, the value of your business may be limited to the value of any tools or equipment you own.

However, if you are the Director of a company that is a corporate trustee, the value of the business would depend on what assets and liabilities are in its name including any premises, machinery, equipment, and bank accounts.

While it is preferable to try and reach agreement with your ex-partner as to the value of your business, it is not uncommon for there to be a disagreement. If this is the case, then your business would need to be valued by a Business Valuer who is instructed by you and your ex-partner at your shared cost.

2. What happens to your business?

While you and your ex-partner may agree that you are to retain your business as part of your property settlement, it is important that your property settlement is formalised in a way that severs any claim your ex-partner may have against your business.

For example, if your ex-partner is a Director of the business, care must be taken to provide for your ex-partner to resign and forego any future claim in the business.

By seeking advice in the early stages of your separation, your family lawyer can help you obtain a binding settlement that helps you move forward with the confidence that your ex-partner can have no further claim on your business.

3. Moving forward – maintaining a source of income

The Family Law Act specifically requires separated parties to consider the impact of any settlement on the future earning capacity of either of the parties.

If possible, the Court will try to find a pathway to allow you to retain your business.

However, the Court will also consider the other assets available for division between you and your ex-partner and whether there is sufficient value in your property pool to allow your ex-partner to receive their entitlement without your business being affected.

For example, if a property settlement involves the sale of assets owned by the business, it may affect the viability of the business and the business owner’s ability to earn an income in the future. In this scenario the Court may not order the sale of farming assets.

However, if there are insufficient assets in the property pool to give the other party their entitlement, then the Court may order the sale of some business assets.

It is important to keep in mind that while best efforts can be made to ensure that you will retain your business without any effect on its viability, there can be no guarantees as much will depend on what other assets are in your property pool and how your ex-partner’s entitlement is to be satisfied.

A family lawyer will help you understand how your business may be treated and explore settlement options that allow you to retain the business if that is your preference.

Get in touch! 

A family law dispute involving your business can quickly become a very stressful and emotional experience. Our team of family lawyers at TGB Lawyers can help you understand your legal entitlements, the value of your business and how your business is likely to be treated in your property settlement.

If you require any assistance or guidance on any matter relating to separation, divorce, property settlement or children’s issues, please get in touch with our caring and experienced Family Law Team or call 1800 730 842 to speak with one of our family lawyers.