Divorce is a difficult and disruptive life event, and when a family business is involved, the stakes are even higher. In Australia, a family business forms part of the relationship’s asset pool and must be divided fairly between spouses.
This article explains the key issues couples face when dividing a family business after divorce, including valuation, handling a business that continues operating, and what happens if the business is sold or closed.
Table of Contents
- Family Business as an Asset in Divorce
- Death of a Family Business After Divorce
- Dividing a Living Family Business
- Continuing the Business Post-Divorce
- Conclusion
Family Business as an Asset in Divorce
In Australia, family businesses are considered part of the asset pool, regardless of whether established before or during the relationship. Separating business and personal interests requires careful planning and the assistance of legal and financial professionals.
Death of a Family Business After Divorce
Not all family businesses survive the strain of divorce. Financial pressures and conflict can lead to closure or liquidation. When a business is sold or liquidated, its value is added to the property pool and divided between the parties.
If the parties cannot agree on a division, the Federal Circuit and Family Court of Australia will decide, considering factors such as the length of the relationship, contributions of each spouse, and future needs.
Dividing a Living Family Business
If the business continues operating, valuing it accurately is the first step. This can be complex and may require forensic accountants or valuation experts.
Once valued, the business may be divided by ordering one spouse to buy out the other’s share or by selling the business and distributing the proceeds. The Court’s orders aim for a fair and equitable division of property.
Sale might not be ideal financially, but sometimes necessary to divide assets cleanly.
Continuing the Business Post-Divorce
Sometimes spouses continue to operate the business together post-divorce. While challenging, this may preserve the business’s value and viability.
Clear decision-making protocols, conflict resolution processes, and defined responsibilities are essential to minimize friction and foster cooperation.
Conclusion
The fate of a family business after divorce depends on many factors, including business value, contributions by each spouse, and willingness to cooperate.
Seeking expert legal and financial advice can help navigate complexities and support a fair, transparent process that protects all parties and the business’s future.
If you need advice or assistance with dividing a family business after divorce, please call 02 9266 0688 or email [email protected].