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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