When parties make the difficult decision to separate, they often have many questions for family lawyers. Matters can become complicated when a separation involves a SME business and family lawyers are often confronted with the below questions.

I had this business before I even met her, how could it possibly be involved in my property law settlement?

He said he didn’t want anything to do with my business, now he’s asking for a share.

My partner and I have a partnership agreement, surely this means my business isn’t involved in my family law matter?

The questions above are only a small snapshot of what family lawyers get asked frequently. In order to understand how and why your business might be involved in your family law matter, it is important to understand the principles behind a property settlement.

What is in the asset pool?

The first step is to determine what assets, liabilities and financial resources the parties have. This includes any asset, liability or financial resource that is held individually, jointly by the parties or with any third parties. At this step, the value of the asset, liability or financial resource is determined as at the date either an agreement is reached or when the matter is dealt with by the Court on a final basis. In order to establish the exact value of some assets, it is sometimes appropriate to have a valuation done.

It is at this point where a valuation of the business or the interest held by one party may be required in order to determine the exact value of the interest so that the asset pool available for division is accurate.

Contributions

Once it has been established what the assets, liabilities and financial resources of the parties are, the next step is to look at the contributions that each party made to the assets of the parties. The contributions of the parties are broken down into the following categories:

1. Financial – for example, the salaries of the parties, any funds received from family members, inheritances etc.

2. Non-financial- for example, renovations made to properties, or assistance provided by one party to the other’s business.

3. Parent/ homemaker- for example, who was involved in the care of the children and doing the housework.

At the conclusion of this step a percentage division assessment is made of the parties’ respective contributions.

Future Needs

After the contributions of the parties, the next thing that will be done is an assessment of the parties’ respective future needs moving forward. The legislation provides a list of 19 factors and some of the common factors from that list are set out below:

1. The age, state and health of the parties;

2. Whether either party has to care for any children under the age of 18 years; and

3. The income earning capacities of the parties.

After an assessment of the future needs of the parties, it may be necessary to make an adjustment in the favour of one of the parties in order to account for the needs of that party.

Just and equitable

The final step in the process of determining a property settlement is to ask “is this just and equitable”. This involves more than just seeing whether the division between the parties is appropriate in dollar terms but making sure the practical effect of the settlement is fair.

So yes, it might be your business and you might have had it before you met your former partner but that doesn’t mean that it is excluded from your family law matter. It is important to get advice about how you best protect your business in the event of a separation so that you’re not left wondering how could my business possibly be involved in my property law settlement?