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Is My Spouse Entitled to Half My Business

  • Equalization of Net Family Property: In Ontario, assets acquired during marriage are generally divided equally unless there's a valid agreement otherwise, under the principle of "equalization of net family property."
  • Matrimonial vs. Excluded Property: Matrimonial property includes assets accumulated during marriage and is divided equally. Excluded property includes assets acquired before marriage or received as gifts/inheritances and may not be equally divided.
  • Business Division Factors: A business started during marriage is likely considered marital property. For businesses started before marriage, division depends on its value increase and contributions from each spouse during the marriage.
Spouses Upset after meeting with lawyer

Divorce in Ontario: Business Ownership

If you're a business owner going through or considering a divorce in Ontario, you may be concerned about how it could impact your business. In this post, we'll discuss how business ownership is treated during divorce proceedings in Ontario.

Equalization of Net Family Property

In Ontario, when couples go through a divorce, the principle of "equalization of net family property" is applied. This means that all assets acquired during the marriage are divided equally between spouses unless there is a valid agreement stating otherwise. The Family Law Act (FLA) provides a formula to calculate each spouse's net worth from the beginning of the marriage until the separation. The purpose of this calculation is to achieve financial equality between the spouses.

Matrimonial vs. Excluded Property

However, not all assets are treated equally during the division process. In Ontario, the law distinguishes between two types of property: matrimonial property and excluded property.

Matrimonial Property:

Matrimonial property includes assets accumulated during the marriage, such as bank accounts, the family home, and vehicles. This property is divided equally between the spouses upon divorce.

Excluded Property:

Excluded property includes assets that are not considered part of the shared marital assets. These exclusions can include assets obtained before the marriage or received as gifts or inheritances during the marriage. While these excluded assets are not divided equally between the spouses, they may still be considered when determining the total net family property.

Business Ownership and Division

When it comes to a business owned by one spouse, it is generally considered an asset subject to division in divorce proceedings. However, determining how much of the business is subject to division depends on various factors, including when the business was established and the contributions of each spouse during the marriage.

Businesses Started Before Marriage:

If the business was started before the marriage, it may be considered excluded property to some extent, especially if it has not significantly increased in value during the marriage. In such cases, the portion of the business's value that is deemed excluded property may not be subject to equal division. However, if it is found to have increased in value during the marriage, the business may then be considered marital property and subject to division.

Businesses Started During Marriage:

If the business was established during the marriage, it is more likely to be considered marital property. In such cases, the business's entire value is generally subject to division between the spouses unless there is a valid marital agreement stating otherwise. The contributions of both spouses to the business, including financial investments, labour, and expertise, will be considered when determining the business's division.

Factors Influencing Business Division

It is important to note that the division of a business does not necessarily mean that it will be split equally in half. The division will be based on various factors, including the value of the business, the contributions of each spouse, and the needs and circumstances of both parties. The court may also consider alternative arrangements such as awarding the business entirely to one spouse while compensating the other with other assets or a lump-sum payment.

Seeking Legal Advice

Every divorce case is unique, and the division of assets, including businesses, will depend on the specific circumstances of the individuals involved. To fully understand how your business may be treated during a divorce in Ontario, consulting with an experienced family law lawyer is highly recommended. A qualified lawyer can assess your situation, provide tailored advice, and help protect your interests during the divorce process.

So, to answer your question? It depends. While marital property is subject to equal division, it does not necessarily mean that your business will be faced with this division. To best navigate the divorce process as a business owner, seek professional legal advice.

Our team has extensive experience representing clients in matters such as the division of property and divorce. We will ensure the protection of your rights and interests. Contact us today for more information and to schedule a consultation.