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Is A Business Part Of The Property Pool In Family Law Proceedings?

Written by Leanne Abela
11 March 2024

Businesses can take many forms, including sole trader, partnership, company and/or trust structures.

A business may have value, either because it owns assets (cars, trucks, stock, tools of trade etcetera) or as a “going concern”. As long as it has value, it will form part of the “property pool” available for division between the parties.

The issue often in dispute is as to what value, if any, the business has.

If the parties can agree on the value of the business, the dispute is resolved. If the parties cannot agree then a valuer may need to be jointly engaged to prepare a report and valuation.

In the most basic of business structures, a sole trader with no employees who merely earns income from creating a business. Such a business will have no value as a going concern, but merely an income stream earned by the sole trader continuing to run his business into the future.

If the business employs multiple employees to generate income for the business, it may have goodwill and value as a going concern. If such a business is run in partnership, then the spouse may only have a share of the value of the business structure.

Sometimes, companies and trusts are set up which own and operate businesses and hold assets including plant and equipment, stock and bank accounts. In these cases, the business is successful and will have a future “maintainable earning” and a business valuer will need to be engaged and be provided with the relevant financial documents so that they can prepare a report and valuation as to the interest and value that the spouse party has in the corporate structure and business and that will form part of the property pool available for division between the parties.

Lawyers are not business valuers or financial advisers and do not possess the necessary skills to undertake the steps required to value business interests. This is the domain of appropriately qualified and experienced accountants who are more often than not, not the accountants for the business but independent and jointly engaged by the parties.

Pearsons Lawyers

This is general advice only. Pearsons Lawyers have a team of specialist family lawyers who can provide timely and accurate advice on all matters that need to be dealt with following a separation including parenting and property matters. To arrange your free initial consultation contact Pearsons Lawyers today on 1300 699 688 and “know where you stand”.

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