The life of a business owner involves long work hours, travel and utilising all resources (time, energy, money etc) to grow their business.
It is no wonder that the combination of these factors can cause a strain on relationships and in some cases, results in separation.
Separation is never easy, but it can be even more difficult for business owners.
This is because business owners have the added uncertainty of having their jobs (and often livelihoods) tied up in a business that is considered an asset of the relationship.
For many business owners, the most daunting aspect of their separation is the possibility of losing their livelihood.
There are several special issues faced by business owners which require early intervention and strategic advice in the context of a separation or divorce.
The three main issues are the ownership of the business, the value of the business and the income generated by the business.
Ownership
The first aspect that needs to be properly considered is the ownership of the business. Most businesses are operated through an entity such as a company or a trust.
It is important that the business structure and underlying ownership is kept in mind when discussing a property settlement as it may give rise to liabilities or benefits, including tax, going forward.
It is important to have the right team of professional advisers in place to help you understand your businesses and how and why they are structured.
In addition to a family lawyer to help with the divorce, property, maintenance and custody issues, you need an estate planning lawyer who understands commercial structures to help ensure that your property settlement is sound when it comes to your business assets.
A good accountant to help with the tax issues is also desirable.
It is not uncommon for third parties to be involved in a business, either as active business partners or investors.
Putting the business under the microscope during a separation can cause serious issues to your relationship with your partners or co-owners, which can have flow-on effects to the operations of the business.
As part of the legal separation, it will be necessary for your advisers to review any agreements between you and your business partner or co-owners, including any shareholders’ agreements, partnership agreements, owners’ agreement, unit holders’ agreements or buy-sell deeds.
This is because these agreements may contain terms that stipulate how the business is to be dealt with and valued in the event of a relationship breakdown of one of the owners.
If you are considering a separation, you need to be thinking about the long-term effects on you, your family and your assets, and working with a team of professional specialist advisers to help you protect you and yours.
This is not one-size-fits-all. Your situation will be unique, and requires careful planning to help you manage your relationships with your business partners, staff, suppliers and customers to keep the process smooth and avoid disruption to the business.
Value
It is difficult to determine the true value of a business.
Business owners may inflate the value of their business to attract investment but underestimate the value for tax purposes.
However, it is necessary to put a value on a couple’s asset pool to work out a property settlement, and a business often forms a big part of the pool.
Most new businesses are worth very little and may in fact be more of a liability in their early stages.
Where a business is more established, issues may arise around the valuation of goodwill, plant and equipment and intellectual property.
Usually the intangible assets are harder to value because their worth is more subjective and more vulnerable to industry conditions and fluctuations in the economy.
Typically, it will be necessary to obtain a valuation report from an independent valuer to put a price on the business for family law purposes.
Selecting the right valuer, and knowing what to say to them, are vital to ensuring that the valuation figure represents the true market value of the business.
We can help by recommending suitable accountants and family lawyers, liaising with them and provide guidance.
Maybe it’s time to put your affairs in order, and create a modern integrated estate plan before it’s too late?
Be cautious, and take advice before you decide.
When it comes to Wills, asset protection & estate planning in Australia, you can trust the oldest law firm in South Australia, Genders & Partners to guide you through the tough decisions you must make for your family’s future care and welfare.
If you have any questions, or would like further information, please call or email us. Would you like a quick phone call to discuss? Feel free to phone or email us or use this link and book a timeslot for a free 15-minute phone consultation on my schedule: https://calendly.com/genders
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We can help you to protect yourself and your family. We look forward to being of service.
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