When a couple is contemplating divorce, they have endless questions in their minds. Their business may be on the peak whereas their marriage is sinking. Often they wonder what will happen with their family business. There is so much the divorcing couple may consider. But the main question is “who gets what?” A family business may make the divorce even more daunting. Unlike a business which could be just one property, more work is involved to a couple who have many pieces of property or businesses that have been generating income for the family.
What To Consider For The Business Division During Divorce
Undeniably, too much is involved in a family business. For instance, if that business was run by both spouses, they must come with a plan on who will manage the business and how the profits will be divided among themselves. Dealing with a family business in divorce requires one to hire best divorce lawyer in Toronto to offer legal assistance. Even with the help of a lawyer, it behooves you to know what you want from the business. According to Canada Family Law, the non-owner spouse has to receive an equivalent of half the value of the business which was acquired at the time of their marriage. But, this may not be the case if the shares were excluded in their marriage agreement. What happens is that the business owner hires an evaluator to help come up with a formal valuation following the set rules of each province or territory. This brings about the reason as to why one would not dare move off with the decisions about the division of business without legal help. See, both spouses may not wish that the business may go down. Thus, they may require a collaborative approach if they had shareholders or workers involved. As you come up with the share of your business, you need to keep some things in mind:
- How to come up with your share of business:Any marriage means that there is an equal partnership. Whatever one contributes towards marriage is equally vital for both parties. If the relationship comes to an end, then whatever was acquired has to be divided equally. But if one party acquired the business before marriage it’s theirs to keep. However, any increment in the value of the business must be shared.
- The tax implications of your business:As you divide your business, it would pay to consider the approach and the tax implications thereof. According to the Canadian Tax Law, you need to be aware of the tax rules that may have an impact during the division of your business, such as the capital gains exemptions.
- Business interest:This is a significant issue that brings a major dispute during the division of the business. If the business interest is of small value, both spouses can agree on how to move forward.
- Use of butterfly transactions: While dividing up your business after divorce, you may opt to use the butterfly transaction method. This is a tax-free method whereby one splits the assets of a corporation into two corporations without having to incur taxes. The final implication of any butterfly corporation is to put assets into corporations for each party.
There are so many approaches depending on what and how you need your business divided after divorce. However, any outcome will be greatly influenced by:
- Whether both of you own shares
- Whether you want to move on with the business after divorce
- Who will be active to run the business
It seems easy to divide a business, but when a divorcing couple has one or more businesses within a corporation, it becomes pretty complicated. This is worse when one thinks about tax issues involving division of corporations in Canada. Remember that with an experienced divorce lawyer, he/she may guide you through obtaining the right tax advice from the best tax advisors. These may help you navigate through the many pitfalls in the area. This is because, with proper tax support, you’re assured that your business will deliver optimal tax outcomes that will limit any disruptions for your business during divorce.
Getting Legal Support For The Business Division During Your Break Off
For the court to determine the ownership of the business, they evaluate several factors such as how the business was acquired, the nature of funds that started up the business and the contribution made by both spouses among others. Your lawyer will need to advise you on how to go about your divorce and still consider how you will get the right share of your business. This is why your divorce lawyer may need to consult with a business specialist or a tax advisor to come up with the right strategies needed for a successful outcome.
