If Two People Jointly Own a Business, What Happens During a Divorce?

Law Blog

When two people want to dissolve their marriage, challenges may lay ahead. They may find it difficult to make any agreement and may need to apply to a court for direction instead. The situation can become even more challenging when the two parties have a joint business interest, and if you're in this situation, you may wonder whether the business will be drawn into your dispute as well. What do you need to know?

Business Inclusion

Even though a limited company is classified as a separate legal entity to all intents and purposes, it will nevertheless be considered part of a property settlement. This will involve a specific process if the two individuals cannot agree on the best way forward and, in certain circumstances, the company may even need to be sold off instead.

Clean Cut

When two parties want to get an official divorce, the court will not be too happy if they suggest that they could continue to run the business in the future. After all, the court may need to decide how to split all the other assets and will not take too kindly to the "status quo" in the business.

Fair and Equitable

A judge will always want to ensure a fair and equitable outcome during property settlement. They'll consider how each party contributed to the marriage from both a tangible and intangible point of view. They will also want to ensure that both parties are taken care of going forward, and thus, one individual may get a larger split of the total property pool than the other.

Getting Good Value

In an ideal world, it's never good to "forcibly" sell a business, as this is unlikely to generate the best financial outcome. After all, the market may be soft at the time, or the business may be going through a weaker cash flow cycle. For many reasons, you may not be able to get the best price for the organisation.

Making Adjustments

If possible, try to make adjustments to the remaining property pool to satisfy the needs of each party. For example, one person may need to relinquish their interest in the family home but keep the business instead. In this case, the other party would resign or divest their shares so that the company could continue without them.

Independent Valuation

If a business has to be included in the property pool and the two principals cannot agree on the way forward, the court will typically bring in a valuation expert. They'll provide an accurate estimation of its value, and it'll then be up to the court to decide how to proceed.

Professional Advice

If you're worried about how your business will fare during an upcoming divorce, get advice from a divorce lawyer as soon as possible.


9 May 2022

Learning about the law

I love watching legal dramas from all different countries. I often call up my friend who is a lawyer to ask her about whether the cases I have seen on the latest drama are realistic or if they wouldn't happen that way in Australia. It's so interesting to me to see the changes that they make to make the stories flow more convincingly as well as the differences between the law in Australian compared to other countries. This blog is for other fans of legal dramas like me and has some tips on the best places to get real legal advice (hint, it's not on the TV!).