Protect Your Practice
Yours, mine or ours? What business owners should know and do to protect their assets in the event of a personal relationship breakdown
by Nathalie Boutet photo: lolostock/iStock
OHN* ALWAYS KNEW HE WANTED to become an entrepre- neur and operate his own business. In his early 20s, he realized that goal when he launched a promo- tional products company in Toronto. Like most entrepreneurs in the early stages of growing a busi-
ness, he put in long hours, doing everything from initiating sales calls to packing and shipping orders. When he got married, he brought his wife, Mary, into the business as an equal partner. She was eager to be involved and helped handle the bookkeeping and human resources functions. In 2013, aſter 13 years of building their relationship and the
business, they separated. It became awkward for Mary to be around the office and she slowly exited — but not without con- flict. The problem: they did not have any sort of agreement in place that outlined what would happen to the business if they divorced. The result: they fought about the value of the busi- ness, who would replace Mary and at what salary, whether or not John could increase his management fees and what share of
*Names and some details have been changed to protect privacy 36 | CPA MAGAZINE | APRIL 2015
future profits Mary would get. Two years, a failed mediation and almost $40,000 in fees later, the couple reached a deal that will see Mary transfer her shares in the business to John.
From the outside looking in, Brian, a partner in a successful law firm, and his wife, Catherine, owner of a small flower shop/dec- oration business that is more of a creative outlet than an income source, seemed to have it all: two children, a lovely home in an upscale neighbourhood, beach vacations. The reality could not have been further from that carefully craſted facade. They strug- gled for years but stayed together largely for the benefit of their children. Finally, 16 years into the marriage they decided to sep- arate. Brian says the stress of having to appear strong and confi- dent for his children while meeting billing targets for his firm and coming to terms with the breakdown of his marriage caused revenue to plummet. With no prenuptial agreement to provide a way forward, it took them years to reach an interim parenting and financial plan. In 2012, they announced their separation and both are in the process of trying to rebuild. They still have not finalized the divorce.
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