Family Law: When your business isn’t an asset: loans, liabilities and business

Considering a business as an asset has been discussed previously on this blog. But what if your business isn’t an asset? What if your business is not making any money and has a sizeable amount of liabilities attached to its name? Do the liabilities under the name of the business mean you (or your partner) will have to pay for them in the property settlement?

 In short – no. Generally, liabilities and loans made out to the company cannot be attributed to directors or owners of the company. When the property settlement is being negotiated the loans of the business will not be represented in the total of the property pool. However, this is ultimately subject to the establishing documents and ownership structure of the company itself.

 But what if the business has loans that have a higher value than any assets of the business? Despite the fact that the business would be valued at a negative figure on paper, it will likely be attributed a value of $0 in the balance sheet for your property settlement because you are unlikely to be personally liable for the loans of the business unless specific personal guarantee have been given. Moreover, companies which only have liabilities and limited assets may still provide an income in the form of a wage which would therefore render the business a financial resource.

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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Property Settlement, Family law, Family Business, Small Business, separation