Vaughan Divorce & Separation Lawyers for the Division of a Family Business
Splitting a family-owned business in a divorce can bring a new set of challenges to an already complex situation. Whether you own a business alone, or with your spouse, the business will likely be impacted in some way by the breakdown of your relationship. The time and investment required to create a profitable business venture are significant. It is important that you retain a lawyer experienced with the division of business interests in a divorce to protect the value of your investment.
At Bortolussi Family Law in Vaughan, our family lawyers have over 120 years of combined experience representing business owners through the separation and divorce process. We regularly work with clients with financial interests that include both simple and complex business interests. We know how best to help you protect these assets, and how to manage the division of family property to protect your right to retain your business. If you have a business to protect throughout your separation, a comprehensive overview will assist in mapping out your options and receiving the necessary legal advice to help make decisions on the best way forward in protecting one of your most significant assets.
Dividing a Family-owned Business in a Divorce
The value of all family assets is included in the equalization of net family property on separation. This includes all business interests you may own on the date of separation. There are, however, circumstances that may allow a reduction in the value of the business interest to be equalized.
The ability to completely exclude the value of a business from the equalization of property is limited but can be achieved through a domestic agreement such as a marriage contract or cohabitation agreement prepared prior to the separation. The parties can opt to include language in their domestic agreement which clearly states that the business, and its value, will be excluded from equalization in the event of a relationship breakdown. This applies as well to family trusts and estate freezes.
Businesses Owned by One Spouse Alone
A spouse who owns a business is entitled to keep the business after separation even if they owe their spouse an equalization payment. However, the value of the business is included in the equalization of net family property, which means that their spouse will share in the value of the business.
If on the other hand the spouse keeping the business is unable or unwilling to satisfy the equalization payment with assets outside of the business, they may have to encumber or sell the business to make the payment.
Business Valuation for the Equalization of Net Family Property
Most businesses require valuation by a neutral third-party professional, known as a Chartered Business Valuator as part of a separation and divorce. Financial statements and other reports from the business’ accountant or the family accountant are usually not enough to reliably establish the value of the business. There are risks to both spouses associated with using reports from any source other than a formal valuation from an accredited Chartered Business Valuator. A valuation from a Chartered Business Valuator is recognized as a fair assessment of the value to be relied upon in the equalization calculation.
Disclosing Third-Party Partners or Shareholders
If third-party partners and shareholders are involved in your business, the nature, manner, and extent of disclosure required may be tailored to the specific situation. However, you will have to provide enough disclosure to accurately assess the value of your interest. A minority discount may be applied to reduce the overall value of your interest in a business (and therefore the value needing to be equalized) if the value of your interest is affected by the fact that others have true control of the business.
Inherited Family Businesses
Inheritances that still exist in your name on the date of separation or that can be traced from other assets or businesses may be excluded from the equalization of net family property. Income from the inherited business is NOT excluded unless the donor’s Last Will and Testament or the Deed of Gift expressly provide that it should be excluded from your net family property.
It is important to preserve all relevant documents over the years to establish and protect your right to exclude your business from the equalization calculation. This includes documents to trace business assets into other, different or new assets.
A consultation with your family lawyer when receiving an inheritance will assist in preserving the exclusion of your family money from equalization in the event of a separation from your spouse. This consultation is most effective when done before the inheritance is received but can and should be done as soon as possible.
Contact the Divorce Lawyers at Bortolussi Family Law in Vaughan for Issues Relating to a Family Business
Every part of your life, including your family business, will be affected in some way by a separation. It is critical that you seek comprehensive legal advice early in the process to make a plan to best preserve your business interests.
At Bortolussi Family Law, our divorce lawyers will help you understand how the law applies to your business so that you can make decisions to help preserve your business interests on separation. Whether you are just starting your relationship or are facing a separation or divorce we will advise you with respect to your substantive rights and obligations as a spouse and how they may impact your family business, as well as procedural options for resolving the issues involved. You may want to consider using the dispute resolution processes available as alternatives to court to ensure that you maintain control over decision-making in relation to your assets and your income, instead of handing that power over to a judge or an arbitrator. If the latter becomes necessary, it is wise, whenever possible, to reach an agreement with your spouse that will narrow the issue(s) that an adjudicator must decide on.
Our firm has earned a reputation based on decades of experience helping to simplify and clarify the divorce process, even in highly complex situations. We provide the comprehensive skills of a Bay Street firm, conveniently located north of Steeles Avenue. From our office in Vaughan, we assist clients from across the Greater Toronto Area, extending out to Mississauga, Brampton, Caledon, Whitchurch-Stouffville, Woodbridge, Maple, Kleinburg, Caledon, Concord, Vaughan, Bolton, Nobleton, Markham, and Etobicoke and all areas in between with all aspects of their separation and divorce process. To discuss your circumstances and learn about the options available to you, please reach out to us online or by phone at 416-987-3300.