If you are facing the possibility of divorce, and you own a family business, the fear of losing control or even losing the business entirely can be overwhelming. It’s more than just a commercial enterprise; it’s your family’s legacy. More overwhelmingly, a divorce that involves your family business will inevitably drag family members into your personal matters.
On the flipside, family business owners might feel helpless when the threat of divorce involving a family member rears its ugly head.
The fear of the unknown and trepidation about how to proceed can delay difficult conversations. However, being informed now will help save headaches later and understanding how divorce impacts family business owners can give you the confidence to navigate it with clarity.
What are the key issues for family business owners in divorce?
When a couple separates and is looking down the barrel of divorce, there is often a requirement for a formal financial separation to occur. In Australia, this is referred to as a ‘property settlement’. The purpose of a property settlement is to ensure there is a fair and equitable division of a couple’s assets. However, this can be tricky where one or both parties own an interest in a family business.
Whether you own a growing enterprise or manage a long-standing family operation, there are three major challenges you’re likely to encounter in the context of a property settlement:
· Disclosure of Business Information
· Valuation of the Business
· Division or Sale of Business Interests
Let’s walk through each of these and what they mean for you.
Disclosure: Yes, you’ll need to open the books
Disclosure of financial information by both parties is required to ensure that a fair and equitable property settlement is reached.
One of the first things the other side’s legal team will ask for is access to your business records: financials, trust deeds, contracts, and more. This can feel intrusive, especially when third parties (like business partners or other family members) are involved or
when sensitive data is at stake. Where family members have supported an individual who is involved in a family law dispute through loans or other financial assistance, their personal documents, like trust deeds and even Wills, can become discoverable through the family law proceedings.
But under family law legislation in Australia, you’re legally obliged to disclose relevant documents so the business can be accurately valued. Refusal can result in subpoenas or even court sanctions.
Before you offer up any disclosure, we strongly recommend that you get legal advice. A well-thought-out strategy for disclosure of sensitive business information should be formulated before you hit send.
If you are an interested party in a family law dispute (for example, a parent of a child that is involved in the family business), you should also consider obtaining independent legal advice about how to protect yourself and your family assets.
Good to know
You’re not expected to create documents or offer opinions, only to provide existing records. We can help you identify what must be shared and what can reasonably be withheld.
Valuation: What is your business really worth?
Often, a spouse will overestimate the value of a business based on top-line figures or asset lists, missing the nuance behind what drives real value. This is especially common with personal services businesses, where the owner's involvement is critical to its performance.
Unfortunately, the Family Court may still assign value based on business performance, even if the value isn’t transferable without you.
Independent valuation can help.
If a business owner and their former partner can’t agree on the business's worth, an independent valuation is essential. Factors like market conditions, customer contracts, and key person risk should all be considered.
Division: Will you keep, sell, or share the business?
Once the business has been valued, you’ll need to work out how it factors into your overall asset pool. Usually, the person actively involved in the business wants to keep it, while the other party seeks a greater share of alternative assets (like property or cash). This can be the trigger for difficult conversations and decisions where spouses are both involved in and own an interest in a family business.
Here’s the catch
If the business is overvalued during negotiations, the only way to achieve a fair division might be to sell the business. This reality often encourages more practical expectations around valuation.
Another consideration: If your business is the primary income stream for the family, you could end up paying twice - first by giving away assets to retain your interest in the business, and again through ongoing financial support to your former spouse for things like household expenses and school fees.
Some examples of how a family law issue involving a family business might be resolved include:
· An agreement by the party that owns an interest in the family business to ‘give away’ more personally owned assets to ensure that the family business assets are not impacted, or a larger settlement sum to the other party. Family support may be obtained to fund the larger settlement sum
· If both spouses own an interest in the family business:
o A buy-out by one party of the other’s family business interest;
o An agreement to sell the business and split proceeds; or
o An agreement to retain a shared interest (with clear agreements in place). This is rare, but it is possible.
Each case is unique, and there is no one-size-fits-all solution. Our recommendation is usually to settle the matter if it is possible to do so, so that it can be concluded by consent of both parties. If both parties cannot agree, it is up to the Family Court to make a determination. How the Family Court might deal with family business assets in its decision is unpredictable and is often circumstance-based, so it is always better to settle if possible.
Final thoughts: divorce doesn’t have to end your business legacy
While the process of divorce and going your separate ways is disruptive, it doesn’t have to destroy what you and your family have built. With the right advice, you can protect your family business, settle your dispute and emerge with both your legacy and your financial future intact.
About the author
ADLV Law work with business-owning families to safeguard their enterprises, clarify ownership structures, and ensure long-term continuity, even during personal change. They are a family-owned law firm specialising in Wills, Estates, Succession Planning, and Business Law for over 20 years. They work closely with families and business owners to provide practical, tailored legal solutions that protect their interests and secure their future.
Phone: 1300 654 590
Email: wehelp@adlvlaw.com.au
Website: adlvlaw.com.au
ADLV Law offers a full commercial law service to independently minded entrepreneurs, investors and their families. We are ready to guide you to the right solution for your legal issue and have demonstrated expertise in advising on all aspects of commercial and business law, taxation, estate planning and succession, philanthropy, family law, property matters and commercial disputes.
