Company ownership varies, which can make handling business assets in a divorce that much more difficult. A couple may start a business, then later divorce. Some companies might have been passed down through the family for generations, giving their owners a deep sense of family pride that may not be felt by their spouse. Other people may own part of a business, perhaps as a partner or a stockholder. Dealing with assets from any type of business can be challenging for a divorcing couple.
Property Division, Generally
The first thing you need to understand is that property division can get messy. Arguments arise over whether property is separate or community. Couples may disagree over how much their stuff is really worth.
In a community property state like California, a couple’s community property is divided roughly 50-50. However, this does not mean that you literally split everything in half. Some assets may be sold, with the proceeds divided equally between the parties. Assets also might be divided based on their worth, with each party getting half. For example, a couple might sell their home and split any money they receive, or one person keeps the home while the other person gets other property equal in value.
With business assets, the situation often becomes even more problematic.
How Business Assets Complicate Matters
So many factors play into how to handle business assets that it is impossible to cover them all. We can give general information in this article, but you need the advice of a lawyer skilled in property division. Here are some common issues with business assets in a divorce:
- Separate Property or Community Property. Keep in mind that separate property brought into a marriage can sometimes ease into the community property column. For example, Jake owns a bike repair shop before he married Melissa. During their marriage, Melissa uses her marketing and business skills to expand the business. The bike shop was Jake’s separate property when they married, but Melissa may be entitled to some of its increased value.
- Professional Practices. Some businesses require the owners to have special licenses. The non-licensed spouse can’t take over the business since they lack the necessary credentials. Here, the party with the license may keep the business but may have to pay the other party half the value of the business.
- Business Structure. Companies may have more than one owner, which must be considered when splitting up business assets. Many businesses have buy-sell agreements that address what happens when owners divorce.
- Sweat Equity. One party may have been the driving force behind the company’s success, while the other took a more passive role. This may be taken into account when dividing business assets in a divorce.
- Third-Party Opinions. In many cases, you need CPAs and other business professionals to establish the value of business assets. They generally review the company’s records. Other factors might include estimates of the company’s future earnings and current and future liabilities.
It is difficult to value a business, so please do not try to do this on your own.
You Need an Attorney Who Knows How to Handle Business Assets in a Divorce Proceeding
Using a divorce lawyer who does not understand the complexities of handling business assets could cost you dearly. If you don’t want your spouse to get more of your business than he or she deserves, contact us today.
Please call us at (415) 293-8314 to schedule a confidential appointment with one of our attorneys. Ms. Burger is a California Certified Family Law Specialist and founder of the Law Offices of Judy L. Burger. We assist clients in California’s Northern to Southern Coast, including San Francisco, Beverly Hills, Gold River, San Diego, Santa Barbara, Ventura/Oxnard, and surrounding communities.