When spouses own a business or run entrepreneurial activities, the division of assets during divorce becomes one of the most complex areas of family law. A business is not just property — it is a sophisticated combination of assets, liabilities, intellectual property, and growth potential. In Canada, as in many jurisdictions, the division of business assets is governed by provincial legislation and federal regulations. This requires a careful legal strategy, valuation, negotiations, and often court involvement.
Legislative framework and general principles.
Division of property under provincial law.
Property division during divorce (or dissolution of marriage) is governed primarily by provincial and territorial legislation, while the federal Divorce Act addresses only certain marriage-related matters.
In British Columbia, for example, the Family Law Act provides that when spouses or common-law partners separate, all “family assets” and liabilities are divided equally, except for those specifically excluded by law.
“Family assets” include various categories: real estate, pensions, investments, bank accounts, and also a business — if it existed at the time of separation.
Assets that were privately owned before marriage or obtained as a gift or inheritance may be excluded from division; however, any increase in their value during the marriage is typically considered family property.
The principle of equal division with fairness considerations.
As a general rule, family assets are divided 50/50, but the law allows adjustments if equal division would be “significantly unfair,” considering contribution, losses, length of the marriage, and other circumstances.
When it comes to a business, the important point is that the business entity itself may remain with one party, with compensation paid to the other through alternative assets or a buyout.
How is a business treated during divorce?
Determining whether the business is family property.
A business owned by one or both spouses at the time of separation is often treated as family property if:
- it operated or grew during the marriage;
- its capital or assets increased due to contributions from both parties;
- it originated from a company created or acquired during the marriage.
If the business was started before marriage, its initial value may be treated as “excluded property,” but any increase in value during the marriage is typically divisible.
Business valuation.
One of the key steps is obtaining an objective business valuation. Several methods may be used:
- Income-based approach: analyzing discounted cash flow and projected earnings;
- Asset-based approach: calculating assets minus liabilities;
- Market approach: comparing the business to similar companies that have been sold.
A business valuator (or family law valuator) may be appointed as an independent expert or selected jointly by the spouses.
Models for dividing a business.
Once the business is valued, several models may apply:
- Buyout: one spouse buys the other spouse’s share, compensating them through assets, cash, real estate, etc.;
- Joint ownership: both spouses keep shares and continue running the business together (a high-risk and conflict-prone option);
- Sale of the business: the business is sold, and the proceeds are divided between the spouses;
- Asset-based compensation: one spouse keeps the business while the other receives alternative assets or a cash settlement.
Taxes, debts, and other legal complexities.
Tax implications.
Transferring a business or business shares can trigger tax consequences (e.g., capital gains). Business owners must structure the division to minimize tax impact.
Business debts.
Businesses often carry liabilities: loans, contracts, guarantees. When dividing property, these liabilities may also be considered family obligations if they relate to the marital partnership.
Date of separation.
The date of separation is critical, because growth or changes in the business after that date may not be subject to division. In BC, the separation date marks the end of accumulation of family property.
Marriage contracts/cohabitation agreements.
To reduce risks associated with dividing a business, spouses often sign a marriage contract or cohabitation agreement specifying how the business will be treated in the event of divorce.
Such agreements must be fair, include full financial disclosure, and involve independent legal advice for both parties to be considered valid.
Practical examples.
- If a business was created before marriage but significantly expanded over time, the non-owner spouse may claim division of the increase in value.
- If one spouse worked directly in the business (management, operations), their contribution may be considered substantial and included in the division.
- If the business is structured through a holding company or trust, these structures must be reviewed.
- If the spouses cannot agree on division or valuation, the matter proceeds to court.
The role of lawyers in dividing business assets.
A professional lawyer plays a crucial role in:
- analyzing the corporate and financial structure of the business,
- engaging business valuators,
- drafting marriage contracts or asset-division agreements,
- negotiating and representing clients in court,
- considering tax implications and preventing negative tax outcomes.
Dividing business assets during divorce is one of the most complex and sensitive areas of family law. Success depends on clear understanding of provincial laws, accurate business valuation, strategic pre-planning (through marriage contracts), and the support of an experienced lawyer. The approach must be individualized, transparent, and fair to protect the business’s stability and ensure equity for both spouses. You can request legal assistance from Fire Bird Law: https://www.firebirdlaw.ca
