Going through a divorce or separation is challenging on its own, but when you add a business into the mix, the complexity can skyrocket. As a business owner, it’s crucial to understand the implications of your split on your business. Here are some essential tips to consider when facing divorce as a business owner.
1. Understanding the Inclusion of the Business
In family law, any interest in a business or company can be considered in a relationship property settlement. Whether your business is structured as a partnership, company, or you operate as a sole trader, it will likely be included as an asset in your settlement. However, the treatment may vary depending on the specifics of your case.
- Valuing the Business
When valuing a business during divorce proceedings, the focus is on the value of the owner’s share, not the entire business. This valuation process is intricate and requires expert input from accountants who employ various methodologies to arrive at an accurate value. Factors such as the stability of earnings, ongoing operations, and goodwill are taken into account.
- Sole Trader Businesses
If your business operates as a sole trader, the outcome may hinge on your skill and training. Typically, sole trader businesses are retained by the individual who possesses the necessary expertise. However, the application of substantive value to this type of enterprise varies depending on its nature.
- Partnerships
In a business partnership, partners may choose to continue operating together, but more commonly, one partner will buy out the other or the business will be sold entirely. The decision often depends on the partners’ ability to work together post-divorce and their respective financial circumstances.
- Companies and Shareholders
The treatment of a company in divorce proceedings depends on whether it’s a family-owned company or has third-party shareholders. Family-owned businesses are usually treated similarly to partnerships, whereas the value of shares in companies with external shareholders must be determined for inclusion in the property pool.
Seek Legal Advice
In conclusion, going through a divorce as a business owner involves unique challenges that require careful consideration and expert guidance. By understanding the implications for your business and seeking appropriate legal advice, we can help you navigate this process with clarity and confidence. Call GLG Legal today on (07) 3288 3511