Does the end of a relationship spell the end of business success?

In today’s business world, spouses and family members engaging in and running businesses together is common practice. From your local corner store or green grocer to your franchise chains and multimillion dollar trading businesses, it is becoming more and more commonplace for spouses and / or extended family to enter into these business relationships together.

Given some thought, this not surprising. Spouses are often attracted to one another through common interests, passions and goals with the end result being business ventures based on these shared ideals.

From this perspective, you can see why so many spouse and family businesses succeed. On the other end of the scale, unfortunately there in truth is the old saying, “don’t mix business and pleasure”. Applying this with Australia’s current divorce rates, you can begin to better understand the basis for this saying. When a marriage comes to an end, it is also likely to spell the end of the business relationship too.

As family lawyers, we often see the fallout of business relationships following the breakdown of the marriage. As the business (including its assets and goodwill) form part of the asset pool of the marriage, you can see how relations can very quickly deteriorate. In most cases, not only is there the matrimonial home, superannuation and other tangible assets, but the added complication of a business asset. With this asset though come added complications. Not only the day to day problems like the continuing running of that business but also the future of its existence and operation, staff issues, assets and goodwill and of course, entitlements of each spouse generally including any profits and losses.

Given the emotions involved in any marital breakdown, the reasons behind the deterioration of that marriage will play a role. If trust has broken down, or if you are no longer able to effectively communicate or if there are other issues (such as parenting disputes or issues in relation to child support), then an ongoing business relationship may well end in disaster. In turn, this then exacerbates an already fragile business relationship that would be required to be maintained for that businesses future existence.

It may be that the parties decide to end their marriage but continue in a business relationship. This is especially the case if the business is a fruitful one. And it is often the case that the decision to continue the business relationship is completely contrary to the decision to end the marriage. This however exposes the parties to the very real risk in the future of having to endure yet another painful relationship breakdown but this time, the end of their business relationship.

So what can we suggest if parties going through a divorce do decide to maintain a business relationship? Firstly, as any lawyer always suggests, “develop an exit strategy and plan for the worse”. You will obviously need to work hard at maintaining open and honest communication between you and be able to maintain a professional relationship. Clearly identify your roles within the business. Consider if those roles will need to change i.e.: to limit the day to day contact between the parties. Make sure you are both aware of all financial information in relation to and pertaining to the business including banking details, tax information and the like. This would include obtaining a proper business valuation to determine its worth. We’d also suggest engaging outside help, both from a business perspective like an account or financial planner and from a personal one, like a counsellor or therapist.

As family lawyers, we are able to assist in whatever path you decide to take, be it ending both the marital and business relationship or choosing to continue on with the business together. Either way, it is always best to get timely, efficient and practical advice before making any decisions in relation to your family business.

For expert Family Law help, please call us on 1800 600 664 or send us an email at info@tayscott.com.au

At Taylor & Scott “ We Care For You.”