Business of Men

What business owners need to know about divorce

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Divorcing can be stressful and an emotionally charged time. Adding the challenge of a business, which you are passionate about and completely invested in, can make for a more contentious divorce.

It is strongly recommended that you make a financial settlement earlier, rather than delay, in the separation. All assets and liabilities (including the businesses you own) are taken into consideration, including the assets accrued and debt incurred during the separation. The Family Law Act of 1975 insists on full and frank disclosure of all financials regardless of your individual situation. You will have to share your tax returns and all financial statements that pertain to you, your interests and your business, which may be for as long as you were in the relationship (although, you only have to hold these documents for 6 or 7 years for the Tax Office now).

What is your business worth?

It may be worthy of obtaining a business valuation (by an independent valuer) earlier in the separation, especially if it is profitable and growing. However, if the business’ financial circumstances change throughout the separation, then this is also considered in the financial settlement.

Your income and other payments.

Many people going through a divorce tend to lower their income and distribute extra expenses through the business to reduce their reportable income for child support and for financial settlements. However, please remember, that child support can (at its discretion) make a change of assessment based on earning potential. This isn’t recommended by your legal professional, albeit widely practiced.

If you are the higher income earner

you may have to pay spousal maintenance. If your ex-partner can prove that you paid the vast majority of the expenses, that you allowed them to live beyond their personal means creating a lavish lifestyle which they can’t sustain themselves, then you may be ordered to pay a portion of your income to your ex-spouse as a ‘wage.’ The Order may be one-off payment(s), periodic payments for a limited time or indefinitely until your ex-spouse’s circumstances or relationship status changes.

If your spouse is a stay-at-home parent

and if you are planning to separate, encourage your spouse to get a job.This can minimise any additional asset distribution in their favour.Often the primary carer of the children during the marriage continues as the primary carer of the children during separation.

If you are the primary carer of children

consider how you can put in place systems or processes to ensure that they are cared for (ie: school pick up or drop off). Being as prepared and as organised as you can be offers the children some sense of structure and security which is essential for their wellbeing during a time of change.

Plan ahead

As parents, it is essential to instigate a Parenting Plan as quickly as you can and consider implementing a Binding Child Support Agreementso that you know your financial responsibilities. You can easily create your own plans and agreement via the Divorce Answered website.

If you work in the business with your ex-spouse

then you need to decide and be clear on what your respective roles are in the business. If, whether and how you plan to sell the business or buy out the other partner needs to be discussed and negotiated.

Are you the sole shareholder?

Even though you may have the entire share-holding for the business, you may have to ‘pay out’ or distribute shares to your ex-spouse. Just because assets may be in one person’s name, it doesn’t disqualify your ex-partner making a claim upon those assets.

Finally, try to safeguard yourself at work during divorce

1. Being proactive and staying professional when at work. Work on your divorce during allocated times or after work hours.
2. “Leave your monkeys at the door.” No matter how bad the divorce situation may become, ensure that you put on a happy face and be ‘present’ at work.
3. Talk with your managers/key staff about your situation (in brief). They can offer some emotional support and understanding.
4. Ask your receptionist to vet the calls from your ex-spouse by take messages and finding out the topic and importance for the call.

A quick divorce is often the cheapest divorce

If you and your ex-spouse can come to an amicable agreement for the financial settlement, you will save thousands to hundreds of thousands of dollars as well as minimise any frustrations that you have towards each other. While you may not feel that the agreement is entirely fair, weigh up the costs of having a legal team ‘battle it out,’ protracting the process and incurring exorbitant fees. Remember, no one wins in divorce and everyone feels like the victim. The quicker you can come to some sort of resolution, the sooner you can move on with your life and financial independence.

Got more questions?

Speak with your commercial and family law legal professionals as well as your accountant for individualised advice.

About Rachael Scharrer

Rachael Scharrer is founder of online resource DivorceAnswered.com.au providing professional information on divorce, separation and saving money.

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