Is My Spouse Entitled To My Business When We Get Divorced?
Divorce is the legal termination of a marriage. It often causes much anxiety and uncertainty, particularly where the division of assets is concerned. The situation is exacerbated when one of those assets is a business.
As a business owner, your company is perhaps your most prized and valuable financial possession. In a divorce, sans a marriage contract, it will likely be assessed to determine whether it is a non-marital or marital asset whose value will be shared with your spouse. A marital asset is any asset that you or your spouse acquire during your marriage.
Under Canadian Family Law, the value of a business acquired during the marriage term, which still exists at separation, must be shared equally between spouses. You retain sole ownership of any business brought into the marriage. However, any increase in the value of said business during the marriage must be equally shared with your partner. If your business was a gift or an inheritance received during the marriage term, it would not be included in the division of assets, unless it is intermingled with other marital assets.
Usually, once the status of the business has been finalized, the business owner would be asked to have a formal valuation of the business prepared, based on established methods. Once there is agreement on the valuation, a process of equalization is used to determine the amount to be paid to the non-owner. A decision will then be made of how payment is to be done, whether in the form of other marital assets, a buy-out or liquidation of the business.
The divorce process can be quite complex and unwieldy, and is covered under Canada’s Family Law and Divorce Acts as well as property laws at the provincial and territorial levels. Given the complexities involved, it is best to hire a family lawyer to guide you through the process.
Bear in mind, should you remarry, the best defence against losing a part of your business in a divorce is planning. There are options such as a marriage contract, buy-sell agreement or placing the business in a trust, which can greatly assist in alleviating some of the emotional distress spouses face during this challenging time.
Are you in need of a family lawyer?
If you are faced with a divorce and are concerned about what will happen to your business, or you simply wish to take precautionary measures, contact us at Highland Law to schedule a free consultation. Our Surrey family lawyers are here to help you to expertly navigate the divorce process and have your matter settled in the least possible time.