Is My Partner’s Business Part of Our Property Settlement?
When a couple divorces or separates, a financial or property settlement is almost always necessary.
If a party to the separation owns a business, even if the business was started before the marriage, it is treated as part of the asset pool and is taken into consideration in a property settlement between them. In this article, we will discuss how a partner’s business is part of the property settlement, and what steps can be taken to ensure a just and equitable division of assets.
What factors influence how businesses are considered in a property settlement?
In most situations, if a spouse has ownership in a business, it is considered in the division of assets after separation.
In a property settlement, all assets and liabilities are identified, and, if there is no agreement as to the value, the assets are valued.
Valuing a business is important if no agreement is reached because the value affects the value of the asset pool. There are many factors which may affect the overall value of the business. These include:
- The structure of the business: whether it is sole trading, a partnership, a trust or a private company;
- The tangible assets of the business;
- Its future potential;
- Its public reputation; and
- Whether it can be sold
A sole trader may argue that the business is just an income stream and there are no assets to be distributed. A larger business may have issues around its future earning potential. The business owner may not disclose or may hide assets within or outside the business, such as in a trust.
If parties cannot agree on a business valuation, the courts may need to intervene, and a third-party valuer be appointed to provide an independent assessment.
Even if a spouse did not contribute or was not involved in the business, their contributions within the relationship (such as to the family home or children) are considered and may ‘offset’ the other spouse’s contributions to the business. Contributions can be financial, non-financial, homemaking and/or parenting contributions.
How can different business structures be considered?
Sole Traders
If a spouse operates a business as a sole trader, there is typically less value to assess. However, there may be assets in the form of stock, equipment, vehicles and/or cash.
Company-Owned Business
A privately owned business can be valued. A valuer considers the assets of the company, ownership and its internal structure. Tax Returns and financial reports are obtained for this process.
Business Structured in a Trust
Businesses within a trust are usually used to protect significant assets. The Trust deed and financials for the trust/s are considered in order to ascertain the assets of and the value of the trust.
How can my partner’s business be divided?
Often parties reach an amicable solution so that one spouse can retain their interest in a business. If not, the Family Court can make orders for the sale of a spouse’s business interests.
Businesses can be a complex area of property settlement. It is important to ensure the business is included in the asset pool in a property settlement, and the value for the business interests are accurate.
Our experienced property settlement lawyers provide expert legal advice and help you navigate the family law process to ensure you receive your fair and equitable property settlement.
Call us today on 02 9929 8840 or click here to book a no obligation consultation.