Thursday, 20 June 2013

Businesses, misconceptions and family law

The financial implications for the parties to a property division can be just as significant as the emotional ones. This is because we might be dealing with the sale of the family home or a significant decrease in weekly income. But the financial implications can be particularly so when there are ‘complications’ to a property division like an interest in a business.

There are a number of misconceptions out there about these issues which can make negotiating a resolution for property division even more difficult. 

Misconception #1 – does a business count?
Often people think of the family home, the car and the bank account. But ‘property’ in relation to family law also includes businesses. Businesses can be included as an asset for family law property division in a number ways but most commonly: 1) Where there are shares in a company; or 2) where there is a small business, most often a ‘family business’, including a sole trader, partnership or Pty Ltd, which has its own value (i.e. “goodwill”) or that owns realisable assets such as real property or motor vehicles or tools etc.  

Misconception #2 – what if a trust “owns” the business?
It does not necessarily matter who owns the business – or interest in the business. If a trust owns the business or your share in the business then the trust – or your interest in the trust – may form part of the asset pool.

Misconception #3 – “but I own it with other people”
Again, it does not necessarily matter who owns the business – or interest in the business – or trust. The whole of the business will not form part of the asset pool – just your share. But it may mean that the other owners will be involved to a small degree in your family law matter while the new legal ownership is sorted out.

Misconception #4 – “but I owned it before we met”
Depending on the circumstances this may mean that the business – or interest in the business – is not part of the asset pool – but that depends on a number of circumstances, including what has actually happened in terms of contributions to this and other assets during the relationship and indeed what other assets there are.

Misconception #5 – “but my ex had nothing to do with the business”
It is important to remember that it does not necessarily matter whether you have both been active in the running of the company – it may be an asset which forms part of the asset pool available for division – because in family law we look at the overall (financial and non-financial) contributions that have been made.
Now, none of these may be relevant in a matter - mainly because the other party agrees to exclude a business interest - but the presence of a business does mean that the division of assets may be more complicated.

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