Divorce and Business Assets
A dollar invested in a business is not a dollar invested in the matrimonial home.
You keep the matrimonial home, I keep the business.
This common structure of settlement is not always fair or prudent. One dollar in equity in a home can be worth more (or less) than one dollar of equity in a business. The considerations in valuing this equity can be very complex, including significant tax considerations.
Furthermore, the future income flow from the business may be subject to claims for child and spousal support. Sophisticated legal advice is required to properly value and consider how these very different assets impact a fair and reasonable divorce settlement.
LEARN HOW YOUR BUSINESS IS VALUED.
In a divorce, understanding how your business is valued is crucial to ensure a fair and equitable distribution of assets. By learning how your business is valued in this context, you can gain insights into the process and work with your legal team to protect your interests. This knowledge can help you make informed decisions and negotiate a settlement that reflects the actual value of your business.
If one or both spouses own a business or owned one at the date of marriage, that business must be valuated. If a business was owned at the date of marriage, its date of marriage value could be deducted from that spouse’s net family property. If the business is still in existence at the date of separation or divorce, it will need to be valuated again because the profit would need to be divided if it increased in value during the marriage. If the business was acquired during the marriage, its value will be shared between spouses and will require a valuation. If the 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 assets.
There is no set way in the Family Law Act to determine the value of a business. Generally, one of two approaches is taken. The first approach focuses on the liquidation value of a business, namely, how much money it would make if all its assets were sold off today to satisfy its creditors. The second approach looks at the future earning potential of a business or what a person might pay to own that business. Generally, the court will use whichever of the two methods produces the higher value.
A lawyer with experience in business asset valuation and division in a divorce settlement can provide invaluable guidance and expertise in navigating the complexities of the process. They can help you understand your legal rights and responsibilities, negotiate a fair settlement, and protect your interests throughout the proceedings.
CALL US FOR A FREE CONSULTATION.
Divorce and business assets in Ontario can be complex and challenging. In a divorce settlement, both parties must understand their legal rights and responsibilities regarding the division of assets, including businesses. Seeking the guidance of a family lawyer with experience in business asset division can be crucial to ensure a fair and equitable distribution. Moreover, it is essential to approach the process with a level head and a willingness to compromise to reach a mutually beneficial agreement that serves the best interests of all parties involved.
Elliot S. Birnboim is particularly suited to help navigate these issues. As the Toronto lawyer at the heart of MatrimonialHome.com, he executes out-of-the-box legal strategies for property division and custody issues. In addition to his credentials as an experienced family law lawyer, Elliot has an extensive business litigation practice over the past two decades. He practices at Chitiz Pathak LLP, a downtown Toronto business law firm.
Schedule a meeting with the firm to learn more about divorce in Ontario and the valuation of family businesses. Arrange a free, no-obligation consultation by calling 1.800.648.7943 or 416-800-2573 or using our online contact form.