What happens to a family business when you divorce?

On Behalf of | Jul 25, 2022 | Divorce

When you and your spouse own a business, going through a divorce can present many questions, concerns and challenges.

Determining the best way to handle your division of assets requires in-depth knowledge of the applicable laws.

Understanding a community property state

In California, any assets you or your spouse acquired during the marriage are subject to equal division. Typically you have a legal right to half a company’s value, even if you are not a co-owner. If you owned a profitable business before marriage, the courts consider it a separate property not subject to division.

Valuing a business during a divorce

It is vital to determine the value of your family enterprise. You and your spouse may disagree on what the company is worth, making it difficult to settle. A neutral party can evaluate the property, revenue, assets, liabilities and future profitability to obtain an accurate assessment.

Dividing a family business equitably

When determining a fair settlement agreement, there are various factors to contemplate. Consider the type of company, length of time in operation and your level of involvement in the daily operations. Some possible options for equitable division include:

  • One spouse can buy out the other
  • One spouse keeps the company, giving up other assets of equal value
  • You both sell the business and split the profit
  • You and your spouse continue to own and operate the business together

If you and your partner cannot find an acceptable option, a judge will decide for you.

Navigating a divorce when you own a business is complex and requires a thorough understanding of family law in California. Protecting your rights and ensuring a fair settlement demands adequate preparation and knowledge of how to present your case in court if necessary.