Spousal Support and Business Owners: What You Need to Know

Divorcing a business owner isn’t just about splitting assets - it’s about ensuring financial stability. When spousal support comes into play, things can get complicated fast. Unlike salaried employees, business owners often have fluctuating incomes, making fair support calculations challenging.

So, how do you ensure support payments are fair? Let’s break it down.

Key Takeaways

• Spousal support in Ontario depends on factors like marriage length, income levels, and financial contributions.
• Business owners may report lower incomes by reinvesting profits or claiming personal expenses as business costs.
• Courts can impute income if they suspect financial misrepresentation.
• Support duration varies based on marriage length and financial dependence.
• Modifications are possible if financial circumstances change, but intentional income manipulation won’t be tolerated.

How Ontario Courts Determine Spousal Support

Spousal support isn’t automatic. Courts consider several factors, including:

• Length of the marriage
• Each spouse’s income and earning potential
• Financial contributions made during the marriage
• Sacrifices (e.g., staying home to raise children)
• Economic impact of the divorce

If one spouse was financially dependent, they may qualify for support. But when a business owner is involved, income assessment can be far from simple.

Why Business Owner Income Is Hard to Pin Down

Unlike fixed salaries, business owner incomes fluctuate. Some tactics that obscure true earnings include:

• Writing off personal expenses as business costs (vehicles, vacations, dining)
• Deferring income to lower reported earnings
• Undeclared cash transactions
• Retaining profits within the business instead of taking a salary

If you suspect financial misrepresentation, hiring a forensic accountant can help uncover hidden income.

What Happens If a Business Owner Underreports Income?

Courts can "impute" income - assigning a more realistic figure based on financial evidence. This can be done by:

• Reviewing lifestyle expenses (luxury assets vs. claimed income)
• Analyzing corporate tax returns and financial statements
• Comparing industry benchmarks for owner compensation

Courts take income manipulation seriously and may order retroactive support payments if deception is uncovered.

How Long Does Spousal Support Last?

The duration of spousal support in Ontario depends on several factors:

• Short marriages (under 5 years): Support is often temporary, typically lasting half the marriage’s length.
• Long-term marriages (over 20 years): Support may be indefinite, especially if one spouse is at a significant financial disadvantage.
• Stay-at-home parents or those who sacrificed careers: Support may continue until they achieve financial independence.

Can Spousal Support Be Reduced or Ended?

A business owner experiencing a legitimate decline in income (e.g., economic downturn) can request a support modification. However, courts won’t allow reductions based on deliberate income manipulation.

Support may also be adjusted if the recipient spouse remarries or becomes financially self-sufficient.

Protecting Your Financial Interests

For the Spouse Seeking Support:

• Work with a family lawyer experienced in business-owner divorces.
• Request full financial disclosure, including tax returns and corporate records.
• If needed, hire a forensic accountant to verify income.

For the Business Owner Paying Support:

• Maintain clear and accurate financial records.
• Consider a pre-nuptial or post-nuptial agreement to define support terms.
• Be transparent about income. Courts penalize financial deception.

Get Professional Guidance Early

Spousal support cases involving business owners are complex. Whether you’re paying or receiving support, understanding income assessment is crucial to ensuring a fair outcome.

Consulting with legal and financial professionals early can help you avoid costly mistakes and protect your financial future.