Going through a divorce is an incredibly stressful and emotional time in any couple’s life. But when one or both spouses own a business, this can complicate the separation and property division.
If you are contemplating a divorce but have concerns about your business or that of your spouse, keep reading to learn more about your options.
How Assets and Liabilities Are Divided in a Divorce
In the province of British Columbia, the Family Law Act states that any property acquired during the marriage should be divided equally between the two spouses. This includes businesses.
Property that was acquired by the spouses prior to the marriage will be excluded from the property division. However, if the value of this property increases during the marriage, this increase in value must be divided between the spouses.
What Happens to a Business Owned by One or Both Spouses?
If one spouse started a business during the marriage, the business must be divided between the two spouses if they get divorced. There are two options for doing this:
- One Spouse Receives Half of the Shares of the Business
Instead of receiving a payout, one option is for the business-owning spouse to award the other spouse 50% of their company’s shares, making them a stakeholder in the business.
This is a good option to consider if:
- The business does not own a lot of valuable assets but has a high share valuation
- The business-owning spouse is only a minority shareholder
- Both spouses want to maintain some involvement in the business
- The business is likely to grow in value over time and generate significantly more revenue
- One Spouse Receives Half of the Value of the Business
The other option is for the business-owning spouse to pay the other spouse half the value of the business.
For many spouses, this is often the more favourable option, as it gives them the ability to have a clean break and not have any ties to their former spouse.
This could also be the better option if:
- The business-owning spouse is a major shareholder
- The business is likely to decrease in value as time goes on
- The non-owning spouse has no interest in being involved with the company moving forward
Work With Surrey’s Leading Family and Divorce Lawyers
At Highland Law, we aim to provide honest and upfront legal services and settle your divorce quickly and efficiently while ensuring both spouses are satisfied with the outcome.
If you are contemplating a divorce but are concerned about what may happen to your business, contact our Surrey family lawyers today to discuss your options.