Marriage With A Business – Consider A Marriage Contract

May 12, 2014

By Brad Smith

What happens when a husband and wife separate and they are partners in a business? Can one spouse be required to buy, or sell, his or her interest in the partnership?

The Ontario Court of Appeal said no in the decision of Danecker v. Danecker.

The Court confirmed that separated spouses are not entitled to a division of property. The spouses are entitled to an equalization payment. The only remedy under the Family Law Act is to list the business for sale.

The Court concluded that failing agreement, jointly held property should be listed for sale and the proceeds divided. Then, in the absence of agreement, there should be an accounting to determine the division of the sale proceeds.

The take away: if in a business partnership with your spouse, and want to avoid a forced sale of the business, the risk of separation should be addressed. How do you do that? Complete a marriage contract that specifies how the business is dealt with upon separation.