Disclaimer: This article aims to provide educational information surrounding income splitting. It is not intended to serve as legal advice. Consult with a lawyer and exercise your discretion before taking action based on the information provided in the blog.
Divorce is a complex, emotionally charged process. It becomes even more intricate when business interests are involved. For couples in Ontario who are also business partners, detangling your finances extends beyond personal assets to shared professional ventures.
One common practice among couples who co-own a business is income splitting through a corporation. How will your divorce impact this arrangement? This article will look at this specific scenario; however, each family and business is unique. We encourage you to reach out to our team for more information.
Divorcing Your Spouse From Your Business Assets
When you and your spouse own a business, there are many factors to consider, from determining the business’s fair market value to creating an operational transition plan. How does it affect income splitting?
In our experience, divorce inevitably puts a stop to cooperative financial strategies, including income splitting. Trust is a foundational element in any business partnership, and as personal relationships deteriorate, so does the ability to effectively manage joint financial decisions.
Your divorce will affect your previous income-splitting arrangement, which has likely provided substantial tax benefits by lowering the couple’s overall tax liability. With the end of this arrangement, both parties need to prepare for higher personal tax burdens. This loss of a tax strategy may significantly reduce the disposable income available to each spouse. This financial shift is crucial when discussing spousal support or the division of assets, as it directly impacts each party’s post-divorce financial stability.
Crafting a Fair Settlement with Plat Simionati LLP
Given the complexities, it is vital that you seek expert legal and financial advice. A fair settlement should address not only the immediate economic needs of both parties but also consider the long-term impacts of the divorce on their financial futures.
At Plat Simionati LLP, we guide our clients through their separation or divorce in a number of ways.
Mediation or Collaborative Divorce
We offer traditional family law advice, as well as mediation and collaborative family law services. These methods can offer a less adversarial and more cooperative approach to resolving disputes, often leading to more satisfactory outcomes for both parties.
Engage Financial Experts to Divide Assets Fairly
Throughout our years of experience, we have built a network of valuators, accountants, and tax advisors who can provide crucial insights into the business’s fair valuation and the tax implications of different settlement options.
Customized Support Agreements
Standard spousal support guidelines may not always fit the unique circumstances of divorcing business partners. We work with you to tailor your agreement to reflect your specific situation and protect your interests.
For couples who are business partners, divorce not only ends a marriage but is a significant shift in their financial landscape. Navigating the complexities of ending income splitting and determining fair spousal support requires a nuanced approach, expert advice, and careful planning.
At Plat Simionati LLP, we guide you with compassion, ensuring your financial interests are protected as you embark on your next chapter. Contact our team to learn more.