Our lawyers can advise you to inform you of your rights and help you protect your business in case of separation. Furthermore, our team of lawyers is also capable of representing you in court to debate issues surrounding divorce or the dissolution of a civil union and indirectly those concerning your business.
The Impacts of Marriage and Separation on Your Business
In a way, our business is like our child. We have seen it grow and prosper. Over the years, we have invested time and money to make it a successful enterprise. To save costs, our spouse might have worked for the business for free. To allow us to fully dedicate ourselves to our business, he or she may have stayed at home to take care of the children. What happens if the owner of a business separates? What will happen to the business? What are the legal impacts of marriage or civil union on your business?
Starting a business is a crucial step in a person's life, just like marriage or civil union. We are fully aware that, despite loving your spouse, you do not want them to have a share in your business in case of separation. However, you should not wait until this stage of your life to think about what you can do to protect your business. There are methods to structure and protect your business against a potential breakup. That is why it is advisable to consult a lawyer or notary before getting married to advise you properly on the best ways to protect your interests in case of a separation.
Here is a brief overview of the consequences that marriage or civil union can have on your business.
Before we begin, it is important to recall that in Quebec, there are three (3) matrimonial regimes: the partnership of acquests, the separation of property, and the community of property. Before July 1, 1970, the general regime was the community of property. In other words, if spouses did not choose a regime, this one was the default regime. As of July 1, 1970, the default regime became the partnership of acquests. Considering that it is rarer these days to find the community of property as a matrimonial regime, we will limit this article to the other two regimes.
The Partnership of Acquests
The Partnership of Acquests
As mentioned earlier, the partnership of acquests is the default matrimonial regime in Quebec. Therefore, if you do not have a marriage contract (sometimes referred outside of Quebec as a “prenup”), you are covered by this regime. It should also be noted that it is also possible to choose this regime in your marriage contract. Consequently, if you have signed such a contract, it is important to read it carefully to know the applicable regime.
Under this regime, there are two types of property: separate property and acquests. Separate property belongs exclusively to one of the spouses, while acquests must be shared between the spouses/partners upon the dissolution of the matrimonial regime. To be able to classify your business, you must refer to the articles of the Civil Code of Quebec, specifically Article 450, which you can find at the following link: Link to Article 450 of the Civil Code of Quebec: Link to Article 450 of the Civil Code of Quebec
Indeed, if you acquired your business before marriage or civil union, the business is classified as separate property. The same applies if it was passed on to you through inheritance or donation. However, if you have acquired or plan to acquire a business during your marriage or civil union, it will be considered an acquest. Therefore, you will have to share it at the time of your divorce or the dissolution of your civil union.
Furthermore, the income generated by your business, whether acquired before or during marriage or civil union, is considered acquests. However, if your business is classified as separate property and the income from its operation is reinvested in the business, it will be considered separate property « subject to a charge of reward for acquests. » This means that there will be compensation that you must give for the amounts to be shared to compensate for the fact that the income was considered separate property. However, if the investment was necessary to maintain the income of the business, no reward will be due.
It is also worth mentioning that intellectual and industrial property rights are considered separate property, but the income earned during the regime is acquests.
In summary, what needs to be remembered from the above is that the rules applicable to this regime can sometimes be disadvantageous when you have a business. However, if no choice is made in the marriage contract or if such a contract does not exist, these rules will apply to you. To avoid the legal impacts of marriage and the partnership of acquests, you will need to opt for the separation of property regime in a marriage contract.
The Separation of Property
The Separation of Property
Separation of property allows spouses and civil partners to be exclusive owners of their property, regardless of whether it was acquired before or during the marriage or civil union. It is important to note, however, that this regime must have been chosen and declared in a marriage contract. Furthermore, if one of the spouses/partners is unable to prove exclusive ownership of the property, there is a presumption that it belongs to both, each for half.
On the other hand, simply choosing this regime does not protect you completely from claims by your ex-spouse or ex-partner. For example, in some cases, your ex-spouse or ex-partner may be entitled to compensatory payments. Compensatory payments are compensation that one spouse owes to the other spouse who invested in the business for several years without receiving fair compensation for the work done during all those years.
Legal Impacts of Marriage or Civil Union on Incorporated Businesses
Legal Impacts of Marriage or Civil Union on Incorporated Businesses
Incorporation can also be an interesting option to protect your business from the legal impacts of marriage and civil union on your business since a corporation is primarily a legal entity with a distinct patrimony. Therefore, incorporation may be something to consider in your situation in conjunction with other legal strategies and structures. If so, we will be happy to inform you about the advantages of incorporation, both generally and on a family level. Of course, it is essential to ensure that all legal impacts of marriage or civil union are covered in a marriage contract.
In addition, our firm also offers incorporation services under both the Quebec Business Corporations Act and the Canada Business Corporations Act. If you choose this option, we can proceed with the incorporation of your company. You will not have to worry about the legal paperwork. To learn about all the legal services we offer to businesses, we invite you to visit the Business, Commercial, and Corporate Law tab in the Services section of our website.
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