Separation and what it means for your business

Separation and what it means for your business

If you and your ex-partner own a business, you might be wondering what will happen to it during separation.

Whether one party owns the business outright or you both own the business in partnership, that business classifies as an asset under the Family Law Act. As a marital asset, a business will therefore need to be valued and the resulting value divided during separation.

How the business is valued and divided is more complex - it depends entirely on your unique private and professional circumstances. While it is impossible to predict precisely what will happen to your business, you can prepare yourself for some of the more common outcomes.

This blog will cover some of those possibilities, and give an overview of some frequently asked questions when it comes to separation and business ownership.

How do I know the value of my business?
When it comes to separation, business valuation is not as simple as putting a number on the net worth of your operation.

Determining that value will involve consideration of any benefits the business owner will continue to receive if they run the business in the future, whether or not the earnings from the business can be considered stable, and on top of all of that, the market value of the business.

Those factors can make determining the value of your business yourself difficult. While some parties undergoing separation can agree on value themselves, in many cases you will require an external party to value the business for you. Business valuation experts are highly proficient in this task and can provide relevant documentation on their final judgment. 

What happens once the value is determined? Will I have to sell my business?
Many people automatically assume they will need to sell their business if they are separating. While selling and dividing the profit is a simple solution, it is not the only solution. Selling may not be suitable for one or both parties if they are personally invested in the business. If you and your ex-partner decide not to sell after valuation, you can begin negotiating with them to find an alternative.

What are the alternatives to selling?
Every business and every separation is different, but there are some common outcomes for each business structure.

Say, for example, your ex-partner is a sole trader running a plumbing business that employs a handful of people. If you are not a plumber and have no interest in plumbing, it is likely the business will stay with your ex-partner. In this case, you might ‘swap’ your share of the business for assets totaling a similar value.

If you own your business jointly and run it as a partnership, one party will usually buy the other party out. Again, swapping for an asset of equal value is an option.

The third and most complex business structure is a company (proprietary limited). If you run a smaller, family-owned business, it is likely you will be able to treat the asset division like a partnership.

In any scenario, the business asset will either be sold or may undergo a change of ownership in order to facilitate the separation. The aim of the court and your legal team is always to divide marital assets as equally as is practicable.

How do I make sure I get the outcome I want?
Ideally, you will be able to come to an agreement with your ex-partner on how to manage the division of business assets. However, we know that is not always possible. Your family lawyer can assist you by preparing you for all these outcomes, helping you to negotiate with your ex-partner’s legal team and advocating for your interests in the separation.

If you are considering separation and would like to speak with a lawyer, the team at Leach Legal can help.

As a highly experienced team of family lawyers in Perth, we specialise in separation and asset division. With Leach Legal, you will be assigned a lawyer who will handle your case from the very first meeting to final settlement. Essentially, your lawyer will be there to achieve better outcomes - your way.

If you would like to discuss business assets and separation - or anything to do with family law - book now for a 15-minute phone consultation:

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