Family Divorce Can Be A Disaster For Small Business
With official statistics showing that almost 40% of marriages end in divorce, or at least in a property settlement, a marriage break up is a horrendous issue for partners in a small business. Instead of concentrating on cash flow, tax matters, business generation and expansion, all goes out the window when the specter of divorce enters.
If both parties to a marriage work within the business, the strains are greatly magnified. Julia Cambridge, the national executive director of Family Business Australia, recently said: “We know of cases where the relationship has broken down, and it has caused the business to fail. Any sort of conflict takes your eye off the game, diverts your attention away from what you are supposed to be doing, and impacts upon the business bottom line.”
Lawyers are increasingly looking at ways to exit a spouse from a business partnership by apportioning income streams or separating parties from discretionary trusts, superannuation, or taxation matters. If a business is reasonably well run and profitable, it can manage. If, however, it is trading at the margin, the divorce can tip the business over. Binding financial arrangements or shareholder agreements prepared to come into effect in the event of a dispute are helpful, but the Family Court can override any such agreement in many, but not all, circumstances.
This is a complex legal field. If we at Matthews Williams can assist you on this or any other legal matter, feel free to phone me or one of our solicitors or call into our office for an appointment.
By Mark Olson