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Jul 14, 2016
So, picture this scenario – you and your partner have just separated. You haven’t dealt with all the legal stuff yet but you knew you needed to leave and now you are looking for a new outlet, a way to start afresh. How about a new business?
Well, let us stop you right there. Starting a business might be exactly what you need to move on. However, the important thing to consider is when you start it.
Family Law property settlements take into account the assets of the relationship. This includes assets acquired before the relationship began, during the relationship and sometimes even after the relationship has been concluded. Why? Well, the Court considers that assets of a relationship go into one joint pool. Any assets acquired or divested by the parties goes into and comes out of one single pool. Acquiring an asset like a business after the relationship has ended was likely only made possible by the resources of the shared asset pool. Buying a business soon after separation doesn’t decrease the asset pool as some may think. Any money you take out of the asset pool to buy the business will still be considered part of the asset pool.
So, what are the consequences if you have bought a small business soon after separation and before a property settlement has been reached? The consequences vary from case to case. It is likely that you will be able to reach an agreement whereby the business is included in your portion of the property pool and therefore remains intact. However, it will impact on the split of the pool against you. Furthermore, you may be accused of devaluing or wasting the asset pool in the most serious of cases.
The take away message from this is that you should wait to buy a new small business (or big business!) until your settlement has been finalized and your financial circumstances are certain. Only then can you be sure there will be no funny business with your new business and your property settlement!
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 02 9688 6023 or email us at jfrank@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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