It is our experience, that one of the most difficult aspects of divorce – or the end of a de facto relationship – is the settlement of finances.

With 2.3 million small businesses in Australia, many divorces are complicated when family finances are intertwined with ownership of a business, and are often are family run businesses.

Being proactive about your financial arrangements when you own a business is vital. It shouldn’t take the prospect of a divorce to start sensibly planning for the future.

However, divorce can have a big impact on a business owned by one or both partners, even in some cases leading to its collapse. Nobody ‘wins’ if that happens.

So below I answer:

– How you ensure a relationship break down doesn’t negatively impact your business;

– How you provide certainty and business continuity if a sudden disruption, such as a divorce, happens;

– Was it necessary to put plans in place before you married?

– What you can do if you start a business after you marry.

Whatever stage you are at, there are some specific steps open to you.

Pre-Nuptial Agreements (Binding Financial Agreements)

If you are planning to get married or enter a de facto relationship, getting a Pre-nuptial Agreement, also known as a Financial Agreement, is one way of protecting and quarantining an existing business from being exposed to divorce or separation litigation.

Pre-nuptial Agreements can be made during your marriage or de facto relationship should you start a business after you become a couple, or you hadn’t considered this before marriage.

Having said that, the ‘pre-nup’ discussion is not always easy and it may cause some momentary tension, but it is easier to broach the subject before a marriage than during it when it might be more easily misconstrued.

It is important to reassure your partner that your intention is not to hurt them, but to preserve and protect your business which you started before you met them, something that will be in everyone’s best interests should the marriage end in divorce.

Financial Agreements can even be agreed after a separation or divorce as a way of finalising financial affairs.

The important thing to note is that both partners must receive independent advice from a lawyer who practices in Australia.

You can read further information about Financial Agreements here.

Buy-Sell Agreements

Buy-Sell Agreements are legally binding between business partners or co-founders and dictate what happens to the shares in a company if one or more of the owners can no longer work for the business.

One of the triggers for this agreement to come into operation is divorce, but this can also cover incapacitation or if someone passes away.

A Buy-Sell Agreement minimises the potential for disputes if a partner can no longer participate in the running of the business for whatever reason, and this gives a business clarity and certainty.

In the case of divorce, with emotions potentially running high, this can prevent a personal matter becoming a big problem for the business if it leads to a long running dispute over shares and who is running the business.

Again, this is more easily thought through and agreed well before any potential separation is on the horizon.

Buy-Sell Agreements can be stand alone or included as part of an existing Share-Holder Agreement.

Shareholding in Your Business

Shareholders should be people who are instrumental in the operations and profit generation of the business.

If a spouse isn’t involved in running the business, making them a shareholder may be a ‘nice’ thing to do, but this adds complexity to a divorce settlement and to your ability to continue to operate the business in an efficient way in the event of divorce.

Having Your Business Finances in Order

Always knowing your worst-case tax scenario is something all business owners should be striving to do, but this comes into sharper focus if there is the prospect of a divorce or separation.

If potential liabilities, such as latent taxes, only become apparent after the financial settlement of your divorce, this could have a negative impact on your business in the future.

A qualified accountant can provide you with the following worst-case tax scenarios:

– Your Division 7A loan (if any) implications;

– Capital gains cost base and capital gain tax consequences if the business assets remain with you or are transferred;

– Small business tax concessions;

– Fringe benefit taxes;

– Company tax payable on any transfer of monies in your business accounts;

– Company losses;

– Unpaid company taxes;

– Stamp duty costs if applicable, for example the company car.

In all divorce matters, it is a legal obligation to exchange financial documents between you and your former spouse. The more your finances are in order, the less opportunity your ex-spouse will have to challenge or question the financials of the business.

The point here is — just make it easy, be forthcoming and deliver the documents in a timely manner — the longer you drag out these requests from the other side, the greater the negative impact on you, your business and on a quick resolution.

Other Things to Consider: Power of Attorney

Not specifically related to divorce, but something all business owners should consider is to have a Power of Attorney in place.

In the event that you become incapacitated or spend significant time out of Australia, this again gives clarity and prevents disputes about who runs your business in your absence.

Empowering People to Live With Courage

Cominos Family Lawyers has dealt with a large number of divorces where one or both partners own a company, so we have seen the issues and heartache that can result when a business becomes embroiled in a divorce.

A complicated, messy divorce can affect its smooth running and reputation, staff morale and even lead to that business failing.

As a family lawyer, my mission is to arm people – not just my clients – with the right information to help them secure a healthy and happy future – empowering people to live with courage.

We’re here to help you be proactive and implement the steps needed to ensure you and your business have peace of mind should any sudden disruption, such as a divorce, occur.

Next Steps:

Contact us today if you would like to start putting a plan in place.

As well as being able to execute many of the above strategies, Cominos Family Lawyers can recommend specialists to help you with any other measures that require attention.


This article is intended as general information only.
If you require legal advice or representation, or want to speak to a speak to a family lawyer, contact us directly on 02 8999 1800 or email