How can a financial agreement affect your family business?
If you’re in business, you will be experienced in dealing with the unexpected, and as a great business leader, these situations will not be completely unexpected. You will have considered your risks and planned for them.
In business, there will be inevitables. Change might be one of them. Good planning would include the impact of a divorce or separation.
Separation and divorce are hard. They can have serious and devastating consequences on your business, even more so, where that business is unprepared.
You may have a partnership. You may have an agreement which deals with the wish to go separate ways. What if your business partner is your spouse? Do you have a formal agreement?
Do you have a financial agreement with your spouse which protects your business? If you’re in business with your spouse, do you have both of these?
Even if you’re not separating on the family front, do you need to look at your future business operations?
In family law, we see a number of family businesses which hit the wall just like the business owners when the players go through separation and divorce. Often, these businesses have grown organically.
They are not set up with the end in mind, other than a plan for getting income, but the future plans extend to the next day. They deal with tax at the end of the year.
A good business in its future proofing has a succession plan.
How can you protect your business?
Business protection is about the future, so communication centering on those impacted by the success or failure of the business is important.
Asset protection is about preserving wealth for the family.
There are a number of structures used which can protect your business from external forces, like having a company or a trust. Or there may be a combination of these.
Asset protection when business owners consider their families (when there is no talk of divorce) includes getting advice about estate planning. This will invariably include the above structures and having wills drawn up to reflect your wishes.
Further asset protection can be had with a Financial Agreement. A well-drafted Financial Agreement allows you to control assets in the breakdown of a relationship.
A financial agreement done during an intact relationship, can consider the possibilities of what might go wrong and how you’d like your future to look. It can consider business control as well as sales, continuance and division.
A financial agreement during a relationship means that the terms can be strategic and creative, it will be focused on asset protection and family wealth. There will be no emotion arising from having separated.
Updating
Like every legal document, a financial agreement should be updated or at least reviewed when a significant event occurs, such as the birth of a child, serious illness or the sale or purchase of a new and significant asset.
Benefits
A financial agreement allows you to exert control over your assets including your business. It can protect and preserve the family business.
If you don’t have a financial agreement which sets out how to deal with all of your marital assets when dealing with a family law separation, the Court will look at what you propose as a division, however, it could have other ideas about how the assets should be split in a divorce.
If you want to discuss financial agreement more, or review an existing financial agreement, contact us at Watson St Claire Family Law.