How Family Law Agreements can empower business owners

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Family law agreements can help business owners draw a clearer line between their personal and professional lives.

When entrepreneurs think of the barriers to their success, their minds will probably turn to their rivals in the industry or maybe even internal tension with their business partners. But some are missing a bigger threat closer to home: divorce or separation from a romantic partner.

According to a survey by a U.S. financial institution, around 57 per cent of business owners said their enterprise had taken a financial hit as a result of their divorce. Even more shockingly, almost five per cent of them reported shutting down their operations altogether because they were unable to handle the financial strain stemming from the split.

The business of property division

The reason for the spillover from a personal relationship breakdown into a business owner’s professional realm can be found in the law of property division.

Barring exceptional circumstances, the Family Law Act starts with the assumption that both spouses will share equally in the family property after their split. That generally includes anything that the couple owned separately or jointly on their date of separation, regardless of whose name it is in.

In addition to the more obvious examples, such as the family home, bank accounts, insurance policies, pensions and investments, shares in a company could also be included. For an asset as potentially valuable as a business, it’s easy to see how this kind of liability to an ex-spouse could jeopardize the entire operation.

Importantly, the law recognizes another category of “excluded property” that does not count fully towards the family property total to be divided, including assets spouses owned before the relationship started.

If your business was formed before the relationship started, it could fall into the latter category, but that’s not the end of the story. For the purposes of property division, spouses must share the amount of any appreciation in value that occurred over the course of the relationship.

Common law complexity

B.C. business owners have an even bigger incentive than most to define the boundaries between their romantic and business relationships at the earliest opportunity, thanks to the intricacies of our family law legislation, which underwent a major overhaul in 2013.

Unlike most other provinces, B.C.’s Family Law Act now makes little practical distinction between married spouses and common-law ones, which means that parties need only spend two years in a “marriage-like” relationship to be considered spouses.

In fact, many entrepreneurs unknowingly stumble into spousal relationships, with the first sign frequently coming as a legal claim seeking an interest in their property — including the business.

Without a fixed definition of the term, disputes abound in B.C. courts about which relationships are “marriage-like,” focused on factors such as the level of commitment between the parties, their financial reliance on one another, whether they live together, and how they present themselves to friends and family.


Young entrepreneurs who want to minimize the risk of their romantic relationship interfering with their burgeoning business should consider hiring an experienced family lawyer who can draft a cohabitation agreement — often referred to colloquially as a prenup — that allows them to take control of their situation.

Despite the nickname, you don’t have to be married or even to have considered nuptials to get the process started. It’s extremely flexible, and agreements could even be backdated to the beginning of a relationship if that’s what suits the parties involved.

In some cases, the contract could relate simply to the couple’s intentions regarding the business, while others may wish to extend its applicability to cover all the key assets and debts held by each party.

Whatever the precise nature and complexity of your own financial arrangements, a contract can be tailored to your unique needs.

In any case, a well-drafted agreement should address each party’s obligations in the event the relationship ends. Once you have a family law contract in place, it’s a good idea to revisit it periodically to ensure its terms make sense as your relationship evolves.

If you would like to speak to a lawyer about how family law agreements can protect your business interests, please contact one of our lawyers. We would be happy to help you.

**This post is not intended to be legal advice and should not be taken as such. Please contact McConnan Bion O’Connor & Peterson if you have any questions regarding this post or require assistance or legal advice regarding family law matters.