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Divorcing with a family business? It won't be easy

The division of marital assets is one of the most complex and emotionally draining aspects of divorce. Unfortunately, it can become even more complex and draining when there is a family business involved.

California property division laws dictate that any property accumulated during a marriage is generally considered community property, and therefore belongs to each person equally. The property is then calculated and divided in half. However, business ownership introduces various nuances that complicate this seemingly straightforward rule.

Characterizing the business

One of the first challenges that arise is determining whether a business is separate or community property. Business ownership is not a finite transaction. It may have started before the marriage or with separate funds, but over time and the course of a marriage, the business will often be supported by the community.

In other words, a business may have started as separate property, but it can easily become community property during the course of a marriage.

Valuing the business

A business is not a static piece of property; its value changes over time and can be complicated to determine in the first place. A forensic accountant is usually needed to calculate everything from current tangible and intangible assets to profitability.

These challenges of valuing a business make it difficult to determine how to split it between two spouses.

Other parties involved

Unlike your home, cars and jewelry, there are often other parties who have a stake in how a business is divided. This includes shareholders and business partners. There may be agreements in place that protect them, which could affect the division and ownership of the property. 

Getting a fair settlement

As noted in this article, there are ways to protect a business before a divorce and in the event of a divorce, but the fact remains that business ownership almost certainly will complicate the property division process.

With all this in mind, we urge readers who own a business or who are married to a business owner to discuss their legal options and rights with an attorney as soon as possible. With legal guidance early on, it can be easier to ensure that a settlement involving a family business will be fair.

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