What happens to a business in a divorce? A 10 step legal guide

Embarking on the journey of divorce, particularly when a business is at stake, can feel overwhelming. Yet, for Australian couples navigating this transition, there is support and clarity to be found. In this article, we’ll outline crucial steps for those facing divorce intertwined with business ownership.

By Stefanie Costi, Lawyer at Watts McCray.

Divorce is a challenging journey, and when a business is part of the equation, it adds an extra layer of complexity.

However, don’t worry; we’re here to guide you through it with a step-by-step approach.

In this article, we’ll walk you through what happens to a business during a divorce and 10 steps to keep in mind on how to manage it effectively, with our professional legal perspective.

1. List what your business owns

Start by making a list of everything your business owns.
This includes things you can touch like property and equipment (tangible assets), as well as things you can’t touch like intellectual property and goodwill (intangible assets). Using the business’ financial documents will be a good starting point.

2. Value your business

If you can’t agree on the value of the business, you can jointly engage a professional valuer to determine how much your business is worth. They’ll look at what the business owns, what it owes, and how much money is coming in to estimate the current sale value of the business.
This valuation will help set the groundwork for a fair property division between you and your former partner.

3. Decide who keeps the business

Make a decision on who will run the business while you’re negotiating your property settlement, and who will retain it at the end. This might involve talking with your former partner about buying them out if they have a legal ownership stake, or even maintaining shared ownership if you both agree to that or selling the business.

4. Work together, if both you and your former partner are involved in the business

If both you and your partner are actively involved in the business, try to make any decisions about the business together.
Clearly define who does what to keep things running smoothly, even during the divorce.
In many cases, only one person is involved in the business, so this won’t be an issue for you, however, it’s important to be transparent throughout your divorce, so keep your ex-partner or their lawyer up to date with the business.

5. Keep your divorce private

Safeguard the confidentiality of your divorce, especially when it comes to the business.
Implement strategies to protect the business’ reputation and avoid unnecessary problems.

6. Get expert help

Seek assistance from legal and financial professionals specialising in family law and business matters.
They can provide insights into legal structures, tax implications, and financial strategies to make the process smoother.

7. Be transparent with your employees

Speak to your employees about the changes.

8. Develop a future plan for the business

After the divorce, have a solid plan for the future of the business. This might mean restructuring, rebranding, or putting new leaders in charge.

9. Consider alternative dispute resolution

If you and your former partner can’t agree on the plan for the business moving forward, think about trying alternative dispute resolution like mediation. This will keep things amicable and help your business relationships stay intact.

10. Keep an eye on your business

Even after the divorce is finalised, continue to monitor how the business is doing.
If things need to change, make the necessary adjustments to ensure that your business continues to thrive.
 

Dealing with a divorce involving a business is complicated, but with our simple steps, it can be made easier. By focusing on talking, planning, and collaboration, you, your former partner, and your business can thrive.

If you have any questions or need assistance, request a call back from our friendly team via the form below or call us directly.