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When California property division in a divorce means business

by | Feb 13, 2015 | Firm News, Property Division, Property Division |

Divorce is often financially complex. In a community property state such as California, it may stir up emotions when deciding, for example, which spouse gets the wedding china. For couples who own a business together, there can be unforeseen complications that do not present themselves until divorce is in the cards. In those circumstances, property division is not only about the present, but also the future.

In this country, a significant number of businesses are co-owned by couples. If there is no clear division between business assets and personal assets, then the business may be deemed to be community property. Continuing to run the business jointly after divorce is rarely feasible, typically resulting in questions over the future of both the business and the people involved. If the business is to continue, then compromises may be necessary.

In certain instances, it may be clear that one partner has a greater vested interest in the business entity than the other. This might provide a clear indication for one spouse to buy the other one’s share, raising the question of the value of the business. Further issues to consider may surround future income potential and retirement plans, as well as how to proceed if the value of half of the business exceeds other assets, or finance, to offset the buy-out.

Depending on how a couple’s business contracts are drawn up, there may be many things to take into account, including current and future tax implications. It may be necessary to consider additional advice and guidance relating to business valuations. This may assist California residents with both the community property assessment and due regard with respect to the implications for each individual involved. Jointly owning a business may make property division more complex, but a fair settlement may still be achievable if both parties work together.

Source: CBS News, “Who holds onto the family business when couples divorce?“, S.Z. Berg, Feb. 10, 2015


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