We often are asked when a client is contemplating a matrimonial divorce, is will I get to keep my business?
I have acted for both husband and or wife over the years in public practice. Its a stressful time for everyone and its full of false hopes, bitterness and anger.
Divorce or separation whether its matrimonial or business never ends happily and ultimately no one wins.
As a small business operator, your business will go through a tough time when the separation proceedings commence. Keep focused !
Work out your game plan. The longer the matter drags , the greater chance to business will be exposed. Emotional energy becomes focused on your personal challenges.
Often, the Accountant will be contacted by the initiator of the separation . In many cases, it is often the male or the dominant controller of the business that starts the process. Planning will start early by one party in many cases.
Separation is often described as two wet pieces of paper being unstuck and normally they don’t come apart easily. Nor do they ever completely come unstuck!
From the outset, it’s important to get independent advice from a lawyer for each party so that process is done fairly and equitably. While nothing is certain, if you are the driver behind the business, then often an agreement will result in you taking over the business completely. The other party will receive other assets such as cash and super or the family home.
Normally one partner believe they run the business more than the other party. the business, Often the silent partner is doing the things behind the scenes to keep the business running. Both partners rights and needs need to be recognised.
Advisers will help you crystalise a plan and explain your rights for both law, taxation and matrimonial.
The role of the accountant in the journey is to provide the lawyers and clients with a detailed list of assets at market value. You will need to review the tax implications of separation as well. This may include obtaining a valuation from a qualified business valuer for the business and some assets such as property.
This article is directed about the matrimonial implications of a divorce, but many of the same implications apply when there is a dispute and separation between business partners. Shareholders agreements and prenuptial agreements can help with the clarity of a split. Those in second marriages, an agreement at the start of the relationship may assist down the track. A business lawyer or a family lawyer can help you explain and draft appropriate agreements.
Look at tax implications and rollover relief
When acting as Accountant for one party against another it’s imperative as your adviser to explore the CGT rollover provisions for each asset. This includes the implications for your SMSF and superannuation balance. Cutting a deal early saves angst and costs. Remember the longer it takes to get a resolution the harder and bitter it becomes.
Sometimes the husband and wife will run an SMSF together. The smsf may have insurance attached to the members accounts. There will be implications if one or both wind up or leave the Fund. Professional advice on how to deal with issues such as insurance is important.
Those who instigate divorce may have been plotting it for a while. Always take a look at unusual transactions going out of the Bank account. Revenge and financial trickery can often be undertaken by either party in a divorce situation.
Your partner may establish new New bank accounts that could easily be secretly established without your knowledge . This means that when the announcement happens one party may start in a better position.
Don’t forget you still have ATO obligations!
Being a Director of your business can have implications for liability and ATO debt recovery. Be careful to continue to meet PAYG W & SGC obligations. Despite what’s happening to remember not to be oblivious to running the business. Keep things ticking along.
The ATO is not sympathetic to what’s occurring in your marriage !
Your role as a Director regardless of what is occurring in your personal life does not mean you can avoid your responsibilities as a Company Director or small business operator.
Start early and avoid trivial arguments. This results in a better outcome. If you wish to take control of your business to be proactive!
Be prepared to give away other assets, such as the family home, to save your business. Think about what will happen post-separation and how the other partner departure will impact the business.
Talk to us as we can assist you to navigate through what is a life-changing event.
Imagine spreading everything you care about on a blanket and then tossing the whole thing up in the air. The process of divorce is about loading that blanket, throwing it up, watching it all spin, and worrying what stuff will break when it lands.”