This article looks at how to avoid a costly divorce battle that could imperil a small business.

When a small business owner is going through a divorce then the worlds of family law and business law can overlap in substantial ways. In fact, a highly contentious divorce can imperil the viability of a small business. That’s because without a marriage contract or shareholder agreement in place, most or all of the value of the small business can be divided between both spouses. Avoiding a costly legal battle is paramount in ensuring one’s business survives after a divorce. Below is a look at some of the ways business owners can protect their businesses from the fallout of a divorce.

Marriage contracts

As points out, ideally any business owner who is getting married will have a marriage contract (also called a prenuptial or domestic agreement) in place to deal with what happens to the business in the event of a divorce. A marriage contract governs how property will be split between both spouses outside of the framework of provincial family law. That means that a marriage contract can specify which spouse retains control and ownership of the business so that it doesn’t become the centre of a dispute later on. Keep in mind, however, that a marriage contract still needs to be fair to both parties. If a marriage contract is too lopsided it could be set aside by a judge.

Collaboration, mediation, and arbitration

When divorce has become inevitable, it is usually, but not always, in the interests of both spouses to keep their divorce out of court. This is especially true for small business owners since, as the Globe and Mail points out, not only could a court order property to be divided in such a way that the survival of the business is threatened, but also details about that business could become public through the courts. Fortunately, there are out-of-court options for business owners going through a divorce. Collaboration, mediation, and arbitration differ in substantial ways, but they all share the same goal of avoiding litigation. One may also have a lawyer present during all of these negotiations, which ensures that one’s interests are being protected.

How much is the business worth?

Finally, one issue that often becomes the centre of disputes over a small business during a divorce is determining just how much that business is worth. Having a business valuation performed isn’t cheap, but it could help avoid headaches down the road. Ideally, both spouses will agree on the same appraiser. However, if a dispute opens up concerning the value of the business then it is important to have a lawyer on one’s side to help negotiate a settlement that will protect the business.

Family law and business law

When a small business is at stake during a divorce then it is important to have a lawyer who is experienced in both family and business law. That sort of unique combination can give a business owner who is going through a divorce the advantage he or she needs to come through the divorce with their business and livelihood intact.