When separating parties own or operate a business, the property settlement can involve more than dividing a house, savings and superannuation.
The business may represent a significant source of income and wealth. It may also have employees, customers, creditors, leases and contractual obligations that continue despite the parties’ separation.
A carefully structured settlement should address both the parties’ family law interests and the continuing operation and value of the business.
Is a Family Business Included in a Property Settlement?
A party’s interest in a business may constitute property for the purposes of a family law property settlement.
The precise interest must first be identified. The business may operate through:
- A sole trader
- A partnership
- A company
- A discretionary or unit trust
- Several related companies or trusts
- Another corporate or investment structure
The Court does not simply treat every asset owned by a company or trust as personally owned by the separating parties. The legal structure, ownership, control, trust arrangements and practical operation of the business must be examined.
Relevant interests may include:
- Shares in a company
- Partnership interests
- Units in a trust
- Rights under a trust deed
- Loans owed to or by the parties
- Retained profits
- Unpaid entitlements
- Intellectual property
- Business premises and equipment
- Goodwill
- Other financial resources associated with the business
A business interest is not necessarily excluded because it was established before the relationship, inherited or operated primarily by one party. The timing and circumstances of its acquisition remain relevant when assessing contributions.
Preserving the Business After Separation
Separation can create immediate operational risks, particularly where both parties are directors, shareholders, trustees, employees or authorised signatories.
Practical issues may include:
- Access to business bank accounts
- Payment of wages, suppliers and tax liabilities
- Authority to enter contracts
- Access to accounting systems and records
- Removal or use of business funds
- Communication with staff and customers
- Control of passwords, websites and intellectual property
- Decisions about borrowing or disposing of assets
- Compliance with directors’ and trustees’ duties
Neither party should improperly remove business funds, destroy records or interfere with operations. Urgent legal advice may be required if there is a risk that assets will be transferred, records concealed, funds dissipated or the business damaged.
Depending on the circumstances, interim arrangements may be negotiated or court orders sought to preserve property and maintain the business pending final resolution.
Financial Disclosure
Both parties have an ongoing duty to provide full and frank financial disclosure.
For a business, relevant disclosure may include:
- Financial statements
- Tax returns and business activity statements
- Bank and credit-card statements
- General ledgers
- Management accounts
- Company and trust records
- Shareholder and partnership agreements
- Trust deeds
- Loan accounts
- Payroll information
- Contracts and leases
- Details of related-party transactions
- Records concerning the acquisition or disposal of assets
Incomplete or inaccurate business records can make valuation and settlement more difficult. Failure to provide disclosure may result in adverse findings, costs orders, orders being set aside or other procedural consequences.
How Is a Business Valued?
The value of a business is not necessarily the amount shown in its accounts, the amount originally invested or the value suggested by one of the parties.
A valuation may need to consider:
- Historical and maintainable earnings
- Assets and liabilities
- Cash flow
- Goodwill
- Intellectual property
- Customer concentration
- Industry conditions
- Dependence on one party’s personal skill or reputation
- Related-party transactions
- Marketability
- Tax liabilities
- Loans owed to or by directors, shareholders or related entities
The appropriate valuation method depends on the nature and structure of the business.
In some matters, the parties jointly appoint an independent forensic accountant or business valuer. Where proceedings are underway, expert evidence may be governed by court rules and directions.
A valuation date can also be important. Business performance may change significantly between separation and settlement.
Contributions to the Business
The Court considers the parties’ financial and non-financial contributions, including contributions to the welfare of the family.
Relevant contributions may include:
- Establishing or purchasing the business
- Providing capital
- Working in the business
- Managing staff, customers or finances
- Guaranteeing business debts
- Providing unpaid labour
- Caring for children or managing the household while the other party developed the business
- Maintaining or increasing the value value of business assets
- Contributions made before, during and after the relationship
A party is not necessarily entitled to the entire value of a business merely because it is registered in their name or because they performed most of its visible operations.
Homemaking and parenting contributions may have enabled the other party to establish, maintain or expand the business.
Family Violence and Financial Abuse
Since 10 June 2025, the Family Law Act 1975 expressly recognises the economic effect of family violence where relevant to property proceedings.
In a business context, relevant conduct might include:
- Preventing a party from accessing financial information
- Excluding them from business accounts
- Using company or trust structures to control family finances
- Preventing a party from working
- Coercing a party into signing guarantees or loan documents
- Withholding wages or entitlements
- Incurring debts in another person’s name
- Using business resources to continue financial control after separation
Family violence does not create an automatic percentage adjustment. Its economic effect must be established and considered in relation to contributions or the parties’ current and future circumstances.
Options for Dealing With the Business
The appropriate outcome depends on the value and structure of the business, the parties’ other property, their working relationship and whether either party can finance a settlement.
Possible outcomes include the following.
One Party Retains the Business
One party may retain the business while the other receives:
- A lump-sum payment
- Other property of equivalent value
- A transfer of real estate or investments
- A superannuation adjustment
- Payment by instalments under carefully drafted terms
This option requires consideration of funding, security, tax consequences and the release of the departing party from guarantees and liabilities.
Sale of the Business
The business may be sold and the net proceeds dealt with as part of the property settlement.
The sale arrangements may need to address:
- Appointment of an agent or broker
- Preparation of the business for sale
- Minimum sale terms
- Continued management before completion
- Access to information
- Allocation of sale expenses
- Tax liabilities
- Treatment of shareholder or director loans
A forced or poorly managed sale may reduce value. Sale should therefore be approached commercially and with appropriate professional advice.
Restructuring the Business
It may be possible to restructure the ownership or operation of the business. This could involve transfers of shares or units, repayment of loans, resignation of a director or trustee, changes to authorities and releases from guarantees.
Any restructuring should be undertaken with family law, corporate, taxation and accounting advice.
Continuing to Operate Together
Some separated parties continue to own or operate a business together, at least temporarily.
This arrangement carries substantial risks and should not be adopted merely because neither party can immediately fund a buyout.
If continued joint operation is necessary, a written agreement should address:
- Management authority
- Access to accounts and records
- Payment of wages or drawings
- Distribution of profits
- Business expenditure
- Deadlock resolution
- Confidentiality
- Sale or exit mechanisms
- Death, incapacity or insolvency
- A timetable for final separation
In high-conflict matters, continued joint ownership may be impractical and commercially damaging.
Third Parties and Business Liabilities
A family law settlement cannot be considered in isolation from the rights of:
- Creditors
- Employees
- Business partners
- Other shareholders or unitholders
- Landlords
- Lenders
- The Australian Taxation Office
- Trustees and beneficiaries
- Other persons affected by proposed orders
The Court may have power to make orders affecting companies and third parties in particular circumstances, but procedural and jurisdictional requirements apply.
A settlement should also address personal guarantees. Transferring a business interest does not automatically release a party from liability to a bank, landlord or other creditor.
Tax and Transaction Costs
Transferring or selling business interests may have taxation, duty, accounting and transaction-cost consequences.
The apparent value of a proposed settlement can change significantly once those liabilities are considered. Family law advice should therefore be coordinated with appropriate accounting and taxation advice before documents are signed or orders made.
Time Limits
Applications for property orders are generally required:
- Within 12 months after a divorce becomes final for married parties
- Within two years after the breakdown of a de facto relationship
A party seeking to commence proceedings outside the applicable period may require the Court’s permission, which is not automatically granted.
The parties do not need to wait for a divorce before resolving their property and business interests.
Obtaining Advice Early
Early advice can help:
- Preserve business records and value
- Identify the ownership and control structure
- Establish disclosure requirements
- Arrange an appropriate valuation
- Prevent unilateral dealings
- Consider interim management arrangements
- Identify tax and third-party issues
- Develop a commercially workable settlement
The objective should be to resolve the parties’ property interests without unnecessarily damaging a viable business.
Speak to a Family Lawyer
Aspire Legal advises and represents clients in property settlements involving businesses, companies, trusts and complex financial structures.
Call 02 8806 2299 or email info@aspirelegal.com.au to arrange a consultation.
This article contains general information only and is not legal, taxation or financial advice. The appropriate approach depends on the business structure, evidence and circumstances of each matter.