Business interests after separation are generally considered as property for the purposes of a property settlement. Similar to other assets, businesses, companies, shares and other business interests may be included in the property pool.

This can become more complex where third parties are involved, the business is actively operating, or there are employees, tax liabilities and other business obligations. Unlike real property, obtaining the information required to value a business and determine the nature and extent of the parties’ interests can be more challenging.

A Business Interest Is Not the Same as an Ordinary Asset

Businesses can operate through different structures. A person may trade as a sole trader, hold shares in a private company or have an interest in a partnership. How business interests in a property settlement are treated can therefore depend on the ownership and legal structure involved.

Where a company is involved, it is important to distinguish between the company and the shares owned by an individual.

A company is a separate legal entity. Its property does not automatically become the personal property of its shareholders when a relationship ends. Instead, the nature and value of a person’s interest in the company may need to be considered within the broader financial position.

Does Owning the Shares Mean You Automatically Keep the Business?

Not necessarily.  As part of a property settlement, the parties may agree that the business is retained by the party who is not currently involved in the business, with the value of the business being taken into account in the overall settlement.

At the same time, separation does not mean that a former partner automatically becomes a shareholder or is entitled to half of the company.

How the business is ultimately dealt with will depend on the ownership structure, the parties’ respective interests and the broader financial circumstances.

If the matter is contested, the Court may determine who retains the business and how its value is dealt with as part of achieving a just and equitable property settlement.

When Both Former Partners Are Involved in the Business

Where both parties own or operate the business, separation can create additional practical issues. 

Questions may arise about who continues to manage the business, how decisions are made while property matters remain unresolved, and whether both parties intend to maintain an ongoing commercial relationship.

What If Other Shareholders or Business Partners Are Involved?

A family law dispute does not remove the commercial rights of other people (third parties) involved in a business.

A company may have unrelated shareholders, while a partnership may involve business partners who have no involvement in the parties’ separation.

Shareholder agreements, partnership agreements and company documents may contain provisions affecting how ownership interests can be transferred or dealt with. These arrangements can influence what options are practically available when resolving property matters.

Financial Disclosure

The party in control of the business must disclose relevant information to the other party. Depending on the circumstances, relevant information may extend beyond personal bank statements and tax returns to company financial statements, tax records, business activity statements, shareholder information, business loans and partnership documentation.

Incomplete information may make it difficult to properly assess the business interest or the parties’ wider financial position.

Why Business Value Is Often More Complex Than It First Appears

Business valuation can be more complex because a business does not necessarily have a single, readily identifiable value. Its value may depend on its financial performance, assets, liabilities, goodwill, future earning capacity, business structure and the involvement of its owners.

In a family law matter, it may also be necessary to distinguish between the value of the business itself and income or benefits received by the business owner.

Different valuation methods can produce different results. The appropriate approach will depend on the nature of the business and the circumstances of the particular matter. Where the parties cannot agree on value, an independent valuation may be required.

The Business May Still Need to Operate While Property Matters Are Resolved

While property matters are being resolved, the business may still need to pay employees and suppliers, meet tax obligations, service customers and manage ordinary cash flow.

Significant decisions affecting ownership, business assets or financial arrangements should therefore be approached carefully. Changes made during a property dispute may affect both the parties’ financial positions and the ongoing operation or value of the business.

How Shan Lawyers Can Assist

Shan Lawyers assists clients across Melbourne and Victoria with property settlements involving companies, shares and other business interests. Our experienced family lawyers in Melbourne provide practical guidance to help clients understand how their business interests fit within the broader family law property framework.

If your separation involves a company, shares or another business interest, contact Shan Lawyers for advice before making significant decisions that could affect your property position or the business.

About the Author

Thirumalai Selvi Shanmugam is the founder, Director, and Principal lawyer at Shan Lawyers and is a leading family law specialist in Australia whose expertise is often sought by organisations and the media.

Disclaimer

This article provides general information only and does not constitute legal advice. Family law matters are fact-specific, and available options depend on the circumstances of each case.

Frequently Asked Questions:

Can my former partner make a claim involving a business they never worked in?

Potentially. A former partner does not necessarily need to have worked in or owned the business for it to be relevant to a property settlement. The broader financial circumstances and each party’s contributions are considered under Australian family law, so the position depends on the individual circumstances.

What if I owned the business before the relationship began?

Owning a business before the relationship does not automatically exclude it from consideration in a later property settlement. When and how the business was acquired, its value over time, contributions made during the relationship and the parties’ current and future circumstances may all be relevant.

Can my former partner become a shareholder in my company after separation?

Separation does not automatically grant a former partner shareholder status. It depends on the company’s structure and who is intended to be included in the property settlement.

What happens if my former partner and I disagree about the value of the business?

If there is no agreement regarding the value of the business, the parties will obtain an independent valuation of the business (a single expert) from a suitably qualified business valuer, with the valuer to be jointly appointed by the parties. 

Can money be taken out of the business while a property settlement is being negotiated?

Normal business operations may need to continue, but significant transactions during an unresolved property matter should be approached carefully. Moving funds, disposing of assets or substantially changing financial arrangements may affect the parties’ positions and should not be undertaken without understanding the potential consequences.

What if the business has loans or significant debts?

Business loans and significant debts are considered in the pool, which may affect the value of the business.

Can a business continue operating after the property settlement is finalised?

Yes, a business can continue operating after a property settlement is finalised. The settlement may provide for one party to retain the business and account for the other party’s interest, or for the parties to continue operating it together. However, as part of the property settlement, if the parties agree to sell the business to divide the sale proceeds, then the business may be sold as part of the settlement. The terms will depend on the business structure, its value, and the parties’ agreed settlement.

Is Selling the Business the Only Option After Separation?

No, if a party can retain the business as part of the property settlement, they may keep it.