What Happens To A Family Business When You Divorce?
Ownership (either full or partial) of a business of any size is considered to be an asset in the legal sense. So what happens to a family business when you and your spouse decide to divorce? As it's considered to be an asset, it should be included in the division of assets triggered by the legal end of your marriage. How this asset is appropriately divided depends largely on your specific circumstances.
Financial Circumstances
Divorcing parties are obligated to be forthcoming and honest when it comes to their financial circumstances (both assets and debts). Even if you had nothing to do with the operation of the business in question, the existence of the business plays a role in your divorce proceedings, as its value will be factored into your soon-to-be former spouse's financial standing. This can impact any financial settlement or ongoing maintenance that you may be entitled to after your divorce.
The Value Of The Asset
If you suspect that your partner is obscuring the value of the business in an effort to artificially deflate the value of their assets, instruct your solicitor to request the relevant business activity statements, bank records/statements and tax documentation relating to the business. Although this aspect of your divorce might seem to be a part of corporate law, the division of assets is a standard part of family law. A solicitor specialising in family law is able to represent your interests.
A Partnership
Your interests may extend beyond simply divorcing someone who runs their own business. What about when the business in question was a shared effort; a partnership between you and your soon-to-be former spouse? This requires a different approach. The end of your marriage is likely to mean that one of you will walk away from the day-to-day operation of the business.
Dividing The Asset
The party divesting themselves from the business must be compensated for their share. This can form part of the overall financial settlement that one party pays to the other, and the amount may vary depending on how much each party contributed to the business (whether this involved ongoing work for the business, or by contributing towards the original funds that allowed the business to be created). It is in the interests of both parties for an agreement to be reached. In some cases, the Courts may order the business to be sold with the proceeds and then divided in the event that an agreement cannot be reached.
A family business is considered to be an asset in a divorce, and the value of that asset must be accurately determined so that it can be appropriately divided.