dividing the family business Archives

When a couple decides to end their marriage, one of the most complex issues that they may face is the division of property. This can be especially difficult when the couple owns a business together. Jointly-owned businesses in California add another layer of complexity to the divorce process. What are your options for keeping or dividing the business? How does California law impact these decisions?

Certified Family Law Specialist Judy L. Burger discusses the specific considerations that need to be taken into account during a divorce involving a jointly-owned business.

Community Property Laws in California

California is a community property state, which means that any assets acquired during the marriage are presumed community property and if found to be community property, must be divided equally between the spouses in the event of a divorce. This includes any businesses that the couple owns jointly. In California, the ownership of a business is determined by both the legal and economic interests of each party.

Legal Interest vs. Economic Interest

Legal interest refers to the ownership interest that is reflected in the legal documents of the business. Economic interest refers to the actual value of the business. In some cases, these interests may not be equal. For example, one spouse may have a greater legal interest in the business. Still, the other spouse may have contributed more to the business and may have a greater economic interest.

Valuing Jointly-Owned Businesses

In order to divide the business equally, it is important to determine the value of the business accurately. This can be a complex process and may require the assistance of a business appraiser or accountant. The appraiser will take into account the assets and liabilities of the business, as well as any future earnings potential.

Options for Dividing the Business

Once the value of jointly-owned businesses has been determined, there are several options for dividing it. One spouse may buy out the other spouse’s interest in the business. This can be done by paying the other spouse their share of the business in cash or by exchanging other assets of equal value. Another option is for the spouses to continue to co-own the business. This can be a difficult option, as it requires the spouses to continue to work together, despite the end of their marriage.

Protecting the Business

In some cases, it may be possible to protect the business from being divided during a divorce. This can be done through a prenuptial or postnuptial agreement that outlines how the business will be treated in the event of a divorce. It is important to consult with an experienced Family Law Attorney like Judy Burger to ensure that any agreements are legally enforceable.

Get Help from a Seasoned CA Family Law Attorney

Divorce can be a difficult and emotional process, especially when it involves a jointly-owned business. It is important to work with a seasoned family law attorney who can help you navigate the complexities of dividing a business during a divorce. Ending a marriage and severing a business relationship at the same time requires keen wisdom in human relationships as well as an encyclopedic knowledge of the law.

Judy Burger is a Certified Family Law Specialist who can guide you through the rocky shoals of divorce and help you with property division concerns over a jointly-owned business. She has solid working relationships with various professionals who can help her protect your interests and ensure that your rights are protected. These accountants, appraisers, business attorneys, real estate brokers, and other professionals work with her to help you get the most from any business division of property due to divorce.

Contact The Law Offices of Judy L. Burger today to learn more and schedule a consultation.

Some consider family business to be the backbone of our economy. In fact, they comprise over 60% of our nation’s employment and 78% of new job creation. Studies have also shown that a business controlled by a family may exist longer than companies that are not owned and run by a family. The divorce of an owner may threaten that longevity. With the right processes and paperwork in place, dividing the family business doesn’t have to lead to a family feud.

Pre-Marriage Planning

This is the best place to start protecting a family business but is often overlooked. A strong prenuptial agreement may address the issue of business ownership, especially if the family business predates the relationship. A family business that starts during the marriage may be a little tougher to divide.

Valuing the Family Business

Usually, the parties need to know how much the business is worth before negotiating their settlement. The parties first may need to determine whether the business is community or separate property. If the business is separate property, did it increase in value during the marriage? The judge will need to know about the assets, accounts receivables, debts, and more. If the business itself or any increase in value during the marriage is counted as community property, courts and attorneys may calculate the value of the family business through:

Pereira accounting often used when the business increases in value due to the non-owner spouse’s efforts.
Van Camp accounting typically used when an increase is due to the economy or the business itself.

After the nature and value of the property are established, the parties may move toward settlement.

Negotiating the Divorce Settlement

The parties may decide to address the family business assets in several ways, including:

Buy-out. One spouse buys the other spouse’s interest in the business.
Sale. The parties sell their business interests and split the proceeds in a mutually agreeable way.
Working together. If the couple both worked at the family business, they might agree to continue working together.

The very nature of the family business may make negotiating even more emotional and stressful. Having a California divorce lawyer by your side can help.

It’s Complicated.

The attorneys at the Law Offices of Judy L. Burger are experienced at all phases of divorce proceedings, including business valuation. Judy Burger is a California Certified Family Law Specialist, and founder of the Law Offices of Judy L. Burger. Please call our offices at 415-293-8314 to set up an appointment with one of our attorneys. We assist clients along the Northern to Central California Coast.

415-293-8314

Jointly-Owned Businesses and Divorce