How to Protect Your Business from a Divorce Settlement
Running a business takes grit, late nights, and years of hard work - the last thing you want is to see it unravel because of a relationship breakdown.
But when separation hits, your business isn’t automatically protected. In fact, it’s often one of the first things to land in the firing line during a property settlement.
Whether you’re a sole trader, part of a partnership, or running a company or trust, your business could be valued, divided, or even sold, especially if you haven’t put the right protections in place.
If you own a business in Victoria and you’re navigating (or anticipating) a separation, here’s how to stay one step ahead, avoid common traps, and safeguard what you’ve built.
In Short…
Yes, your business is considered part of the total asset pool under the Family Law Act 1975, which governs family law matters nationwide.
That means if you're separating or divorcing, your business may be valued, assessed, and divided, just like real estate, super, and other financial assets.
To reduce the risk of disruption:
Set up the right business structure
Formalise agreements (BFAs, shareholder, or buy-sell)
Keep your business finances properly documented
Get advice from experienced family lawyers early (even before separation)
Let’s break down how each of those works in practice.
Why Your Business Isn’t Automatically Protected
It’s a common misconception (and a dangerous one). Many business owners assume that because the business is in their name, or because their partner wasn’t involved in running it, it’s off-limits in a separation.
Unfortunately, that’s not how family law works.
In Australia, separation property settlements are governed by the Family Law Act 1975. That law doesn’t care whose name is on the ABN or who was working 12-hour days in the business.
What matters is whether the business is considered part of the shared asset pool, and more often than not, it is.
Here's why…
All assets are on the table
The court looks at everything - homes, investments, superannuation, vehicles, debt, and yes, business interests. Even if your spouse never set foot in your office or warehouse, the business can still be considered a joint asset.
Contributions aren’t just financial
Just because one person built the business doesn't mean the other didn't contribute. Non-financial contributions, like looking after children or supporting the household so the business owner could work longer hours, are also considered.
Growth during the relationship counts
If your business increased in value while you were together, that growth is usually part of the divisible asset pool.
It doesn't matter whether the business started before the relationship. What counts is how much it changed during the relationship and how much it is worth now.
Control doesn’t equal immunity
You might control the business operations, but the court can still look through structures like trusts and companies if they believe you're the real controller and beneficiary.
Just because it’s “held by the business” doesn’t mean it’s protected from a property settlement.
Family law prioritises fairness, not technicality
The Family Court’s goal isn’t to punish anyone, but it does aim to divide property in a way that’s just and equitable.
If your business is a major asset in the relationship, it will likely play a key role in the final settlement.
Structuring Your Business for Long-Term Protection
Not all business structures offer the same protection in a family law property settlement. If you’re still operating as a sole trader (or haven’t reviewed your setup in years), you could be exposing more than you think.
Here's how different structures stack up when it comes to protecting your interests during a separation.
1. Choose a Structure That Stands Up Under Scrutiny
Your business structure isn’t just about tax. It also affects how exposed you are during a family law matter.
In Victoria, common structures include:
| Structure | Legal Risk in Divorce | Notes |
|---|---|---|
| Sole Trader | High | Treated as a personal asset (easy to divide) |
| Partnership | High | If your ex is (or was) a partner, it’s messier |
| Company (Pty Ltd) | Medium | Shares are valued and may be split or bought out |
| Trust | Medium | Can be included if you’re a trustee, controller, or beneficiary |
Myth alert: Just because your business is under a company or trust doesn't mean it’s protected. Courts in Victoria will look at who controls the business, not just the structure.
2. Protect It Early with a Binding Financial Agreement (BFA)
Think of a Binding Financial Agreement (BFA) as a prenup or postnup for your business.
These agreements are enforceable under section 90B–90D of the Family Law Act (and for de facto relationships in Victoria, under section 90UB–90UD) and can:
Define who keeps what if the relationship ends
Keep your business out of lengthy court proceedings
Help ensure continuity of operations
To be valid, both parties must receive independent legal advice, and the agreement must meet strict legislative requirements.
Without a BFA, your business may be fully exposed in a property settlement, especially if it’s grown during the relationship or contributed to household income.
3. Internal Business Agreements Can Add a Layer of Protection
If you're in business with others, a relationship breakdown shouldn’t derail the entire operation. That’s where agreements like shareholder, partnership, and buy-sell agreements come in.
These documents can:
Prevent unwanted transfer of ownership to ex-partners
Set out what happens if a partner divorces or separates
Include valuation methods and buyout terms
Protect other shareholders or directors from being caught in your family dispute
In Victoria, these agreements won't necessarily override family law, but they do influence how a court views your business arrangements, especially if third-party interests are involved.
4. Keep Your Business Books in Order
When it comes to diving property during divorce, documentation is everything. You’ll need clear records to show how the business was funded, who contributed what, and how it operated during the relationship.
Make sure you have:
Up-to-date profit & loss statements
BAS and tax returns
Annual financial statements
Bank records and shareholder loan documents
Employment contracts (including if your spouse worked in the business)
Trust deeds or shareholder agreements
These documents don’t just help value the business. They can also support your argument for keeping it operational, especially if you were the driving force behind it.
5. Don’t Wait Until You’re Splitting to Get Advice
Whether you're happily coupled or heading toward separation, the best time to protect your business is before there’s a problem.
In Victoria, the Family Court takes a wide, flexible approach to dividing property, so pre-emptive planning can go a long way.
Here’s what to do:
Talk to a family lawyer experienced in property and business settlements
Review your structure and agreements with your accountant or business advisor
Get a BFA in place if your relationship is serious and you want to protect what you’ve built
Update your records regularly and keep clear financial separation between personal and business assets
Separation Without Planning Can Cost You Your Business
If you’re a business owner going through a separation, failing to plan isn’t just risky - it can be catastrophic.
We’re not just talking about financial loss. We’re talking about the potential to lose control of the very thing you’ve built from the ground up.
A business that once supported your family, your staff, and your long-term goals can suddenly become the centrepiece of a legal dispute, one that drains your time, money, and emotional energy.
Here’s what can happen without a plan…
Forced Sale or Buyout
If your business is one of the major assets in the relationship and there’s no agreement in place, you may be required to sell it or take on serious debt to buy out your former partner’s share of the value.
Loss of Control
Courts can order a change in company ownership or force a redistribution of shares. Even if your ex wasn’t involved in day-to-day operations, they might still walk away with a portion of the business or, in some cases, a say in how it's run.
Operational Disruption
Property settlements take time. During that time, uncertainty can shake up the business. Staff may leave. Clients may lose confidence. Strategic decisions might be delayed.
Cash flow can tighten just when you need it most.
Increased Legal Costs
When there’s no Binding Financial Agreement or shareholder agreement in place, everything has to be negotiated from scratch, which often means protracted, expensive legal battles that cut deep into the business’s profits.
Damage to Reputation and Morale
If your separation becomes messy and public (or starts to affect your ability to run the business), your team, suppliers, and stakeholders may lose faith.
That reputational damage can be hard to recover from, especially for small and medium-sized businesses.
And Worst of All?
You could lose the ability to keep running the business altogether.
If the court decides your former partner should receive a significant portion of the business's value (and there’s no other way to “pay out” that share), selling the business may become the only option.
Years of work gone in a matter of months.
Need Help Protecting Your Business in a Family Law Matter?
At Hamilton Thomas Lawyers, we understand that separating as a business owner comes with a unique set of pressures, both personal and professional.
Whether you're planning ahead to protect your business or already navigating a property settlement, our team of experienced family lawyers will guide you through your options with practical, strategic advice tailored to your circumstances.
Let’s work together to protect what you’ve built.
