There are a lot of married couples who decide to run a business together. This is a great way to get to know your partner's ideology and get them involved in the business. However, if the real-life partnership comes to an end and results in a divorce, problems will arise. Private companies operating jointly have 50:50 shareholders and directors, or one spouse with a majority role. When a divorce or separation occurs, it creates a major problem for the company. It may become more complicated if other shareholders or directors are involved. A family lawyer in Parramatta guides you to take the right step in this process and to provide you with quality advice that can help both parties to make the right decisions for their company.
How To Divide Business Assets in Divorce?
Control of the company
If the company has 50:50 shareholdings in common, it needs to be locked up temporarily or until the right decision is taken. In this case, neither the husband nor the wife can decide on the company without the consent of others. Usually, people who are going through divorce are considered on the advice of family lawyers to deal with the issue daily while the divorce is going on.
During A Dispute
In the event of a dispute, the family court has the power to transfer the ownership of the company between the spouses. This is evident from the subject of the restrictions set out in the article of the company. The court may try to assist the spouses in separating their business interests if their finances do not allow them to buy out for others. However, if both couples decide to run the business together, a shareholder agreement shall be drawn up to regulate the functioning of their business. Although there is a high potential for future disagreements in this case, this may be problematic. The best lawyers in Parramatta therefore advise one of the partners to exit the business by agreement.
When One Of The Spouse Exits The Company
In case a spouse agrees to exit the company, an agreement of transfer of shares shall be drafted or the company can buy back the shares of the existing spouse. Parramatta Lawyers are well-versed in this area of law and can guide you when there are tax consequences. Once the spouse decides to leave the company, the company needs to be validated. A specialist forensic accountant may be able to guide you through valuation. A good valuation report can enable the parties to proceed with settlement and can assist with negotiations as well.
Valuing a Business during a Divorce
A valuation can be a complex process, as it depends on:
Revenue from the business
Business assets such as assets, stock, machinery, vehicles, etc.
Value of all pensions
Whether or not capital amounts can be extracted from a business
Whether or not it is possible to borrow money from a business or its assets
The structure of ownership of the company
After the business is valued, depending on the ownership structure the family law may take the call. If it is owned by one or both spouses, it will be treated as a marital asset. If it is owned by a group of people with a divorced spouse as a minority shareholder, then only the value of shareholding will be relevant.
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