If you own a business, entering a marriage or de facto relationship without a prenup is a significant financial risk. Under Australian family law, a business can be treated as part of the joint asset pool when a relationship breaks down, meaning your former partner may be entitled to a share of something you built before, or during, the relationship. A properly structured prenup (formally called a Binding Financial Agreement, or BFA) is one of the most effective tools available to protect your business interests.
How Australian law treats a business in property settlement
The Family Law Act 1975 gives the courts broad discretion when dividing assets after separation. A business is generally treated as a financial resource or asset, and the court will consider its value, any contributions made by your partner (directly or indirectly), and each party's future needs. Even if your partner never worked in or for the business, contributions to the household or family may be counted as indirect contributions to the business itself. Without an agreement in place, you may find a significant share of your business is at stake.
What a prenup can do for business owners
A BFA can be drafted to ringfence your business so that it remains your sole property in the event of separation. Specifically, a well-drawn agreement can:
- Identify the business as a pre-relationship asset and exclude it from any future property pool.
- Set out how any increase in the business's value during the relationship will be treated.
- Address the treatment of business income if it is used to fund joint expenses or investments.
- Specify whether a partner who contributes to the business (through work, contacts, or support) will receive separate recognition outside the property pool.
- Cover shares, trusts, or other structures associated with the business.
For a BFA to accomplish any of this, it must meet strict legal requirements. Both parties must receive independent legal advice before signing, the agreement must be in writing, and it must comply with the relevant provisions of the Family Law Act. As our detailed guide on what makes a binding financial agreement enforceable explains, missing even one of these requirements can render the agreement void.
Valuing the business: why it matters at drafting stage
One of the most practical challenges for business owners entering a BFA is establishing what the business is worth at the time the agreement is made. A clear, documented valuation at the outset protects you in several ways. It provides a baseline so that any growth during the relationship can be measured. It also prevents future disputes about whether the agreement fairly reflected the asset at the time of signing.
If you own a business through a company or trust structure, those entities will also need to be properly addressed in the agreement. Ownership structures that look separate on paper can still be treated as part of the asset pool if a court finds the structure was designed to frustrate a partner's entitlements.
Protecting a business in a de facto relationship
BFAs are not limited to married couples. De facto partners in Australia have broadly similar rights to married couples when it comes to property division, and the same exposure applies to business assets. If you are in, or entering, a de facto relationship and own a business, a BFA is just as important as it would be for a married couple. The rules around eligibility, timing, and enforceability apply equally. Our article on de facto break up entitlements in Australia covers how these rights play out in practice and why early planning is critical.
What a prenup cannot do
A BFA is a powerful tool, but it has limits. It cannot override a court's jurisdiction to make parenting orders, and it cannot include provisions that are contrary to public policy. If the agreement was signed under duress, or if one party was not provided with proper independent legal advice, a court can set it aside entirely, leaving your business exposed. The agreement also needs to reflect a genuinely fair outcome at the time it is made. An agreement that was clearly one-sided, or that failed to properly disclose the value of assets, is at greater risk of challenge.
Regular review is also worth building into your planning. If your business grows substantially, or if your relationship circumstances change, an outdated BFA may no longer reflect the reality of what needs protecting. You and your partner can agree to vary or replace the agreement, provided the same legal formalities are followed.
Getting the right legal advice
Business owners face more complex drafting requirements than most when it comes to BFAs. The agreement needs to account for company structures, shareholder agreements, partnership interests, trusts, and the potential for passive appreciation in business value. Getting this right requires a lawyer who understands both family law and the commercial context in which your business operates.
Acting before a relationship is in difficulty is always preferable. Courts will scrutinise agreements that were signed close to a separation, and a rushed or incomplete agreement may do more harm than good. If you are considering entering a relationship, or are already in one and have not yet put an agreement in place, now is the right time to take advice.
At Rockwell Family Law Services, we work with business owners to draft BFAs that are both legally sound and commercially realistic. Contact us today to discuss your situation and the options available to protect what you have built.