For many founders and owner-operators, the business is not just an asset. It is years of work, a team of people, relationships with clients and suppliers, and often the family's main source of income. So when a relationship ends, the question is not only what is it worth? but how do I protect it while this is resolved?
This article sets out what business owners need to know about the law, the process, and the practical steps that keep a company running through a separation.
This is general information, not legal advice.
The business is part of the property pool
Under the Family Law Act 1975 (Cth), the court considers all the property of both parties, however and whenever it was acquired. A shareholding in a private company, a unit holding in a unit trust, a partnership interest or a sole trader business are all property. Where the business is held through a discretionary trust you control, the trust's assets may also be treated as your property.
It does not matter that the business was started before the relationship, or that your spouse had nothing to do with it. Those facts are relevant to how the property is divided, through the assessment of contributions, but not to whether the business is in the pool.
Valuation: the central question
In most matters involving a business, the most important, and most contested, number is its value.
Who values the business?
Usually an independent expert accountant or valuer. Parties often jointly instruct a single expert, which saves cost and is encouraged by the court. Where there is a strong disagreement, each party may seek permission to obtain their own evidence, or engage a shadow expert to review the single expert's work.
How are businesses valued?
Common methods include:
- Capitalisation of future maintainable earnings
Estimating sustainable annual profit and applying a multiple that reflects risk. Used for most trading businesses. - Net assets
The value of the assets less liabilities. Used for holding and investment entities, or businesses without sustainable profits. - Discounted cash flows
Used for businesses with predictable long-term cash flows. - Industry rules of thumb
Used as a cross-check in some sectors.
Where the arguments are
- Normalised earnings
Adjusting profits for one-off items and personal expenses run through the business. - Owner's remuneration
Deducting a market salary for the owner's role. A generous deduction lowers the value; a modest one raises it. - Capitalisation rate
Small differences in the multiple produce large differences in value. - Personal goodwill
Where a business depends on one person's skills and relationships, some of its apparent value may not be transferable. Courts consider whether that goodwill is saleable. - Loan accounts and tax
Shareholder loans, Division 7A loans and deferred tax liabilities affect the net value of the owner's interest.
Understanding these issues, and testing the other side's assumptions, is one of the most valuable things your lawyer and accountant can do.
Contributions: building the business
Once the business is valued, the court assesses both parties' contributions across the relationship. Your work in establishing and growing the business is a significant financial contribution. So may be capital you brought into the relationship to start it.
But your spouse's contributions count too: as a homemaker and parent, which enabled you to work long hours; directly, if they worked in or supported the business; and financially, if family income or assets were invested in it. Australian courts have moved away from giving extra weight to the "special skill" of an entrepreneur over the homemaking contributions of the other party. Both are contributions, and both are weighed.
Disclosure: an ongoing duty
Both parties have a duty to give full and frank disclosure of their financial circumstances. Since June 2025, that duty has been set out in the Family Law Act itself. For a business owner, it extends to the business's financial statements, tax returns, management accounts, bank statements, loan accounts and dealings with related parties.
Incomplete disclosure is one of the fastest ways to lose credibility with the court and to attract costs orders. It can also lead to orders being set aside years later. It is far better to disclose fully and manage confidentiality than to hold back.
Confidential commercial information can be protected through undertakings, limiting access to lawyers and experts, and, if necessary, court orders.
Keeping the business running
A separation can destabilise a business if it is handled badly. Practical steps help:
Maintain normal operations
Continue to run the business in the ordinary course. Avoid unusual transactions (large bonuses, asset sales, restructures or changes in distributions) without advice. These can be seen as dissipating assets or manipulating value.
Manage your spouse's role
If your spouse works in the business or is a director or shareholder, get advice before changing their access, authority or pay. Directors have legal rights and duties, and employees have employment protections.
Protect confidentiality
Limit the number of people who know about the separation. Communicate with staff, clients and lenders only if and when necessary, and in a considered way.
Talk to your co-owners
If there are other shareholders or partners, check your shareholders' or partnership agreement. Some contain provisions triggered by a shareholder's divorce or by a court order affecting shares.
Speak to your lenders early if needed
Refinancing to fund a settlement is common. Lenders prefer to hear early and with a plan.
Structuring the settlement
In most cases, the business owner keeps the business and the other party receives other assets of equivalent value, or a payment over time. Options include:
- Offsetting
The non-owner receives more of the other assets (the home, investments, superannuation). - Cash payment
Funded by refinancing, retained earnings or sale of non-core assets. - Deferred or instalment payments
Secured appropriately, sometimes with interest. - Superannuation split
Where super is available to balance the division. - Share transfer or buy-back
Where the non-owner holds shares, the company or the owner buys them.
Each option has tax implications. Transfers under family law orders or binding financial agreements may qualify for capital gains tax rollover relief, but the recipient inherits the cost base, and the latent tax. Company payments to shareholders can raise dividend and Division 7A issues. Good settlements are designed with the business's accountant.
Protecting your business in advance
If you are in a relationship, or entering one, the best time to protect your business is before any difficulty arises:
- Binding financial agreement
Sets out how the business will be treated. See binding financial agreements. - Shareholders' agreement
Transfer restrictions, pre-emptive rights and valuation mechanisms protect the business and co-owners. - Clear records
Document loans, capital contributions and distributions properly. - Estate planning
Ensure control passes as you intend. See wills and estate planning.
See also our article on family trusts and divorce.
Practical checklist
- Gather the business's financial statements, tax returns and management accounts for at least three years.
- Identify all entities you control or benefit from, and your loan accounts with each.
- Review shareholders', partnership and loan agreements for provisions affected by separation.
- Talk to your accountant, confidentially, about likely valuation issues and tax.
- Get legal advice before changing your spouse's role, making unusual distributions or restructuring.
How we can help
We advise business owners, and the spouses of business owners, on every aspect of separation involving a company, trust or partnership. We work closely with forensic accountants and valuers and with your existing advisers. See high net worth divorce and property settlement.
This article is general information about the law as at the date it was last reviewed. It is not legal advice and does not take your circumstances into account.