Dividing marital assets in a divorce is rarely easy. However, when married couples own an interest in a business, the complexity of property division may increase significantly. There are many options for dividing business interest that typically involve either some sort of buy-out or sale
California is a community property state. That means that business interests acquired during the marriage are likely community property – whether both spouses are involved in the business or only one. In a situation in which only one spouse governs the day-to-day operations of the business, it is likely that the owner spouse will want to keep the business after the divorce and the other spouse will seek a buy-out of his or her interest. .
When both spouses are involved in the business, however, it can become more complicated. This is where an experienced business and family law attorney can help structure a deal that satisfies both parties.
Valuating the business
With many business, as with many relatively high value assets divided in divorce, the most important initial step is to determine the value. Just like a home, some people can agree on a value without a more formal process. Other times a formal business valuation (business appraisal) is necessary. Anyone who owns a business interest and is going through divorce places him- or herself at risk if the business is not properly valued, as this can affect everything from the initial division of assets to spousal support. Undervaluing or overvaluing the business can result in an unequal division of property.
Options after valuation
Once a value is determined, a divorcing spouse should decide his or her ultimate goals as they relate to future operational involvement with the business. Common options include:
- Buying the business outright: If one spouse has enough capital, or other offsetting assets, it can make the most sense to buy out the other spouse and continue the operation as an individual owner
- Dividing the business: For larger businesses, there may be an option to divide the business so that each spouse can operate some portion of the business at his or her own discretion
- Selling the business: If possible, selling the business so that each ex-spouse may either pursue his or her own business or retire may be the best option
- Dissolving the business: It is also possible to dissolve the business by selling off assets and filing dissolution documents with the state
- Keep the business relationship intact: For ex-spouses who feel as though they can maintain a professional relationship, it is possible to remain legal partners in a business after divorce, although this is quite difficult on an emotional level and is fairly rare
Obtaining an equal division of assets in regards to a jointly owned business interest in a divorce is highly dependent upon individual circumstances. Business owners in California contemplating divorce or in the midst of the divorce process should contact a skilled California divorce lawyer familiar with handling the division of a business to ensure they receive an equal distribution.