Relationship Property Settlements for Business Owners – What You Need to Know
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If you are facing a separation or divorce, and either you or your partner own a business (or an share in a business), the question of who gets to retain the enterprise is likely to arise. For a party who relies on their business for their personal income, this is of particular concern throughout the property settlement process.

Whether you own a small family business, start-up, or large enterprise, there are a number of key issues to consider in the event of a relationship breakdown. Graeme Freeman (Principal at Freeman Family Law and Accredited Family Law Specialist) addresses some of the most frequently asked questions in this area below.

Is My Business Likely to be Considered a Joint Asset?

Under the Family Law Act, a person’s legal or equitable interest in a business (whether held solely or jointly with another individual) is considered to be joint property within a relationship. This means that, in the event of a relationship breakdown, the business will be included in the pool of property available for division between the parties.

In most cases, the person who owns the business will want to retain it intact. This may or may not be realistic, and will depend on the value of the business itself, along with the value of the other assets held by the parties at the point of separation (including property, investments and superannuation).

Who Decides What My Business is Worth?

Property settlements are more complicated when a business forms part of the property pool, particularly if the business involves complex financial structures. The business owner’s accountant can be critical in helping to determine the true value of the entity. A well placed accountant will usually have an intricate knowledge of the business, the way that it operates, and what it’s strengths and weaknesses are.

Unfortunately, it is not always possible for the parties to agree, and there will often be a dispute about the true value of a business. In these circumstances, it becomes necessary for the parties to appoint a forensic accountant as a joint expert to provide an objective valuation of the business. This is achieved by valuing the assets held by the business, and reviewing its past performance.

Will I Need to Sell My Business?

In most cases, the partner who conducts the business will want to retain it intact as part of the property settlement. This can be achieved in cases where the other assets in the property pool are sufficient to ensure an equitable distribution with the other party. In rare circumstances in which the business is the only asset, or represents a major portion of the assets in the pool, then a sale may be required.

If the business is highly profitable, it is often in the best interests of both parties for it to be retained intact, particularly if the parties have children. In such circumstances there are various settlement options available that may help prevent a sale. These include staggered payments, which may or may not be linked to future profitability.

How Do I Protect My Business in the Event of Separation?

We are firm believers that ‘prevention is better than the cure’. If you own, or are looking to start up a business, it is critical to seek advice from an experienced family lawyer about how best to protect the enterprise in the event of a separation. If you work in partnership with another person within the business, you should advise them to do the same.

At Freeman Family Law, we have helped hundreds of business owners to navigate the separation process and achieve a final outcome with their business intact. As accredited specialists in Family Law, we have the expertise required to ensure an accurate business valuation which factors in all relevant tax considerations.

If you are a business owner looking to protect your enterprise, or if you are facing a separation and wish to ensure that the proper value of the business is taken into account, call us today for an initial consultation.

Edited on the assumption that this refers to business partners, as opposed to a partner in the relationship.

Freeman Family Law has been assisting clients for over 30 years on matters involving divorce or separation, complex financial and property issues, as well as advice on parenting and wills & estates. Book an appointment with an Accredited Family Law Specialist online or at one of our offices in Yarraville, South Melbourne, Caroline Springs, Essendon or Mornington.

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