Business division at divorce or dividing business assets is a complex area of BC Family Law. Our Vancouver Divorce Lawyers would like to explain the basic principles around business division at the time of separation of divorce. Let’s look at an example:
So you were a married unit during your marriage and allowed your partner to establish a business. Now the business is thriving but your marriage is not. You want half of the value of your partner’s business after separation but do not know how to start. Our Vancouver Divorce Lawyers Explain what you should consider below:
2 Things to Consider for Business Division at Divorce
- Do You Want Half of the Shares or Half of the Value of Business Division at Divorce?
It is crucial to know which one you want. Sometimes having half the shares is more valuable and profitable than having half of the assets:
- Assets of the business are usually objects that are in it. So if your spouse has a dental practice, the equipment must be worth a lot of money and you will get half of those. But if the business as a whole is not doing so well, you should just ask for half of the value of its assets rather than its shares.
- But if your spouse owns a software company, the assets are not worth much but the actual business and clientle is. That is when you ask for half of the shares instead of the assets because the shares are worth more money.
2. Do You Want Your Money Now or Later? Business Division at Vancouver Divorce?
- Is your spouse the sole shareholder or is he/she owning shares in a big corporation?
- Is the company or business likely to grow and be worth more in the future or does the future look dim?
If your ex-spouse is the only or the major shareholder, then you should probably divide the value of his/her company. This way the company is appraised and you will get money for half of your interest.
If he/she is only a minority shareholder and has little to no control over how the business does in the future, and you think the business will grow and make much more money, then you need to ask for half of his/her actual shares. This means you will get your money later.
The Better Approach for Business Division at Divorce
It is often better to get half of the value of the company upon separation. Our Vancouver Divorce Lawyers know the reason: finality. Most couples do not want to be connected to one another or stay as shareholder in each other’s businesses after divorce. If you ask for half of the shares, you will have to be involved in the business and may not be able to obtain funds upon separation. In addition you may have fights with other shareholders or face problems as a result of your ex-spouse still hating you and wanting to ruin your life.
The other danger is asking for a share split rather than half of the value of the business is your ex-partner winding down his/her business or diluting the shares to make sure you get as little value as possible out of the corporation.
How Do I Value Business Division at Separation or Divorce?
This is not an easy or inexpensive task. In most cases you must invest to hire a Vancouver business evaluator to properly value the business and divide business assets in divorce. There are various methods of evaluating a BC Business. Two popular ones are:
- Asset Valuation
- Going Concerns/Share Valuation
Asset valuation is appropriate when the business is not doing that well and its assets, equipment, real estate, etc are the main source of its value.
If the business is doing well and it likely to obtain high profits in the future, a share valuation or going concern valuation is appropriate because the valuator will estimate how much the company is likely to earn now and in the future, determine the company’s assets and liabilities and come up with a value of the shares.
Once the share value is determined, you can often ask for half of the shares’ value or simply ask to continue keeping half of the shares.
You Must Hire a Business Valuator for Business Division
If you think the company is worth more than $50,000 you must invest in a business valuator to help you come up with the value of the business or its shares. The following are the companies our Vancouver Divorce Lawyers usually recommend to our clients:
- Blair, MacKay, Mynett is one of the most credible and court approved valuators out there. They are not cheap, but worth the money invested. Expect to spend anywhere between $10,000 to $20,000 for a proper business valuation.
- Ron Hooge from Smythe CPA, is an old time favourite of the BC Courts. Reports are generally cheaper than Blair, MacKay but not as extensive — which is not necessarily a bad thing. His rates range from $5000 to $20,000 for business valuations.
Be careful about tax complications arising from BC Business Division at Divorce.
Business Division at divorce and how to best approach it so that you can obtain your complete rights, is a complex area of Vancouver family law. Contact one of our award-winning Vancouver Divorce lawyers for a consultation to learn about your case’s strategy and steps forward.