Sunday, 3 January 2016

The Small Business Family Law Dilemma

Clients with small businesses often find themselves gobsmacked at the approach that the family law courts may take in relation to their business. A valuer will regularly be appointed at significant expense and that valuer will place an astronomical value on a business that the client has no ability to sell, leaving them with a fixed asset of paper-worth but little by way of realisable value.
The situation that may result is a difficult one for many small business owners to face – that they will be left with just their personal-services business whilst their former spouse will keep the whole of a house and a significant proportion of their superannuation to boot.
Clients on the other side of this equation will often not appreciate the precariousness of a valuation that may come falling apart, or indeed how a business owner might readily lower their business incomes dramatically to avoid a genuine valuation of the business occurring. Recent developments in the law regarding how ‘add-backs’ are considered mean that this becomes a particular risk for parties to family law disputes.
Not even considered in this situation yet is the impact such a valuation, or the forensic accounting exercise undertaken to get to a valuation, may have on the business partner(s) of a person undergoing a family law property division.
Judicious and early advice is the best answer to help you deal with the complex web of outcomes in such a situation, whether you operate the business or are the former spouse of such a person.

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