Jointly-Owned Businesses and Divorce
California Divorce, Property Division

Jointly-Owned Businesses and Divorce

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.

 

Property Division in a Community Property State (Like California)
California Divorce

Property Division in a Community Property State (Like California)

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When Julie and Jackson married, they were both in their early 30s. Both were successional professionals who had lived on their own for years. After an 8-year marriage, they decided to divorce. Then the fun began – each had brought assets and debt into the marriage. Together, they had continued buying real estate, art, books, automobiles, and household goods. Their attorneys advised them of how property division works in community property state like California. Of course, they had never given it much thought until their divorce. Julie and Jackson were not sure whether their belongings were community property or not.

State Laws on Property Division

Each state in the United States has its own divorce laws, including laws about dividing the divorcing couple’s assets and debts. There are two primary ways to split marital property:
  • Equitable Distribution. Most states follow this type of property division. Courts grant marital assets to the parties as a fair and equitable distribution.
  • Community Property. A few states use the community property system. It is assumed that the spouses have equal interests in the marital property. Assets – and debts – may be split equally between the parties.
States even differ in the way they hand equitable distribution and community property. That’s why it is important to understand the laws of your state.

How Community Property Works in California

Deciding what is ‘property’ may be the first step in a divorce. Generally, property is anything that can be bought or sold or anything that has value. For example, Julie and Jackson own a house and each has a 401(k) plan. The house can be bought or sold, and the 401(k) plans have value. Therefore, the house and 401(k) plans are property that will be divided as part of the divorce settlement. A couple may negotiate a marital settlement agreement that splits their property to their satisfaction. Even so, it’s a good idea to have an experienced divorce attorney help. It’s not always easy to figure out what is property, community, or otherwise. If the parties are unable to reach an agreement, a court will divide their property based on California community property laws. According to California Family Code, courts generally start with the presumption that the couple’s community property will be divided equally. However, courts may weigh in on whether an asset is separate or community property. Also, the court may award more than 50% of the assets to one spouse based on “economic circumstances.” When one party commits domestic violence or misappropriates funds, courts also have the discretion to award more assets to the innocent spouse.

Community Property Division Is Not Always Easy.

Finding assets and determining their value, as well as whether the asset is separate property or community property, requires deep knowledge of California divorce laws. 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.