Divorces are unpleasant. However, a silver lining in the divorce trends in Australia is the current crude divorce rate that has gone down from 2.8 in 1999 to 1.9 in 2019 for every 1,000 estimated resident populations.
Quoting writer Rita Mae Brown, “Divorce is the one human tragedy that reduces everything to cash.” Nothing can be truer for married couples-cum-business partners heading for a separation. All softer emotions that initially had brought two individuals together are washed away by hard feelings and harsh realisations.
They say marriages are made in heaven; where are divorces made then? Ideally, at the legal advisor’s office since separation in life also mean separation in the business that the couple has built together. And, who better than a lawyer to equitably settle business property between the two?
Doing business while getting separated
Splitting a business entity, separating its finances is a tricky affair. It is advisable that as divorcing spouses, you should not continue to operate your joint business together. It may not be feasible to work together owing to ongoing marital discord. However, to preserve your business, you could attempt:
buying it out from your separating spouse
agreeing to pay the buyout price gradually from company profits, subject to the stability of earnings
bringing in another investor
selling the business in the open market, after careful consideration of profit estimate and settle with the amount received from the sale
Businesses are treated as property under the Family Law. Before initiating the separation process, you need to mutually agree on the value of your business assets and the amounts of debt on each, in the absence of which reaching a fair property settlement will be hard.
It has to be borne in mind that even if one of you is comparatively less involved in business, it is likely to be considered an asset to the marriage and, therefore, divisible. If you had drawn business credit jointly, both of your creditworthiness would be affected.
Please remember that any self-managed superannuation fund calls for specialised legal treatment.
Though ample chances of ambiguity will remain, you also need to agree upon who has contributed what to the business financially and otherwise to ascertain each party’s entitlement.
Furthermore, list factors such as child care arrangements and financial independence of both to draw up a just and equitable division of business property in the marriage.
Seek professional help
If you cannot agree upon property valuation and settlement, you’ll likely have to fight it out in court, in which case the court may order the sale of the business. To avoid such a scenario and conclude the process smoothly and amicably without either of you feeling cheated of hard-earned property, seek legal help.
Naturally, there would be disagreement between the warring partners regarding the valuation of property, involvement in business, and entitlements. Professional legal advice can not only help you sort out property settlements but can also prevent significant damage to your business owing to the separation.
If you find yourself in an unfortunate situation where you need to rearrange your life and business due to marital separation, get in touch with experts like Prime Lawyers Family Law for a free case evaluation.