Family Law: I’ve given a loan to my ex-partner’s business: Now what?

Starting a business requires a lot of time and effort. Often, businesses will require an injection of cash to get them up and running. Frequently, someone will loan money to the new business. Sometimes this is the bank and sometimes this is the partner to the relationship.

But when the relationship has broken down and you still haven’t gotten your money back, what happens next?

There are a few ways your loan to the business may be represented in a property settlement:

1. The loan will be represented as an asset on the balance sheet. The business owes you money which will be repaid in the future.

2. Your loan to the business may also be viewed as a financial contribution. You contributed to the growth of the business and therefore you may be entitled to a portion of the value of the business. This is the same for any contribution to a business. If you have contributed time, money or any other resources to the business and have not been sufficiently compensated elsewhere (for example through equity/shares or salary), then you are entitled to a portion of the value of the business.

• Also the property settlement may be the time to negotiate being paid back for the loan. For example, the business owner may agree to give you a proportionately larger portion of the house in exchange for having the loan on his business discharged, and the business owner may take on the loan to the business instead.

 If you have a family law matter, concerns about your family business or questions about family law and separation in NSW and want to find out more please do not hesitate to contact us on 9688 6023 or email us at info@franklegal.com.au.

This article is provided to the reader for general information. It is not legal advice. It was written by Andrea Spencer & Emily Graham and edited by James Frank.

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