The Cost of Legal Separation and Its Impact on SMEs

Coming on the heels of our latest article, The Cost of Legal Separation Explained, the topic of this month’s post – how legal separation costs can impact a scaling-up small or medium-sized enterprise (SME) – allows the synergy between Up4Scale’s mission of empowering SMEs and the tone and aim of the promoted article to shine through. As per the article’s headline, we’re going to “explain” the costs of the process so that you can arm yourself with information on how to minimize its financial impact if you think it could be relevant to you or your business partner.

So, what is the typical cost of a legal separation? Well, this legal process can ordinarily run between $1,000 and $10,000 in lawyer’s fees, though a contested legal separation could have a price-tag of more than $20,000. The amount of money that you will spend will depend on how complicated and lengthy the process is, and whether you and your spouse can reach an amicable separation agreement. An amicable separation means that the legal separation should only take a few days to complete if you have all the paperwork and signatures. Usually, amicable legal separations cost about $50 to $60 an hour for attorney fees. Lawyers bill activists and their clients for their time, meaning that when you speak with a lawyer, they are going to be keeping an hourly record of all the work they do on your case, which can add up quickly if you go to them for the wrong reasons, such as a need for emotional support or an inability to pay for their service outright. The typical hourly rate for a consultation with a lawyer specializing in legal separation is $250 per hour, while the hourly rate can go up to $500 for senior partners.

For SMEs, the costs involved in legal separations present a number of different problems. First, if one business owner is fighting a separation from a spouse, then the other SME owner should be very mindful of the costs of that separation. As they continue, the cost may escalate and force one owner to take drastic actions to cover the cost of the fight. So, if parents seeking divorce were both involved in the separation of a business as equal owners, then the costs in a legal battle could be substantial if left unchecked. Furthermore, from a financial standpoint, a legal separation allows couples to live apart and end any financial obligations they previously had for each other. Therefore, you will have a fairly large marital estate to divide that will temporarily require lawyers for both sides to ensure the best possible outcome for everyone involved. Spousal support is available in most states in Canada, even in the presence of a legal separation. The amount of spousal support that you will be entitled to will depend on a few different factors, including how many years you have been living apart, whether or not you have children, and whether or not you have become self-supporting. The only real downside of spousal support is that the required amount and duration can change if you get remarried, a practice known as rehabilitation spousal support. If you start a new business after divorce and remarry with the new business owner, for example, then you may be required to give each of your first spouses some of your earnings from this new business once your new marriage is notarized.

A lot of times people ask how much a legal separation typically costs in Canada? We’ll get into that later, but let’s first talk about if you really need a legal separation at all. For the most part, all that a legal separation requires is for both marriage parties to sign a legal contract stating that they want to stay apart but maintain the married status. A legal separation agreement allows for physical separation while leaving an emotional connection intact. This agreement states that any assets you and your spouse gained during the marriage belong to that person unless otherwise agreed upon between the couple.

Although lawyer’s fees can vary from firm to firm, to answer the above question and give you a rough estimate of how much you might spend, you will probably pay a range of $1,500 to $3,500 for the mere drafting of a legal separation agreement. You may also want to see a family lawyer who can help guide you through the various legal issues that may arise during the separation process. For an initial consultation, you will likely pay about $200 to $500 in lawyer’s fees, whereas attorney fees for a contested legal separation will be much higher, at around $15,000.

The couple will often select a single bank account to serve as a main or control account for the business while the legal separation or divorce is in progress. During a legal separation process, outlays may occur based on simply having a joint account for the business. In these moments, the couple may want to eradicate the risk associated with having joint accounts and instead open separate business bank accounts.

In the case of a dissolution, a business owner must completely separate themselves from the business in order to protect their personal assets. The owner then files for an LLC in his or her state of operation, then submits for a fictitious name with the local county. Finally, the owner opens a new business account, which makes the business 100% owned by the person filing for separation.