Keeping a California Divorce Out of the Family Businessfz1208
Divorce is stressful enough on its own. Throw in a family business, and you might have a recipe for disaster. If you are a business owner in California and are now facing a divorce, you are probably seeking answers about how it can jeopardize your business. In a divorce where there is a dispute over property and assets, a family law court will normally divide everything in half.
However, for someone who owns a business, losing half of your business could lead to bankruptcy. Most businesses can’t survive if they lose half of their profits. If you are in this situation, you need an experienced divorce attorney to help you protect your long-term business interest. There are many ways a divorce can threaten a business.
It should be noted that unless there is a prenuptial agreement that says otherwise, all assets acquired during a marriage belongs to both spouses equally – a 50-50 split.
You and your spouse may no longer be involved in a romantic relationship, but if you own a family business together, you might need to learn how to maintain a professional relationship with them.
Just as you determine who gets what property and negotiate a child custody agreement, you will need to make decisions about what happens to your jointly-owned business in your divorce.
If you haven’t already, it is wise to hire a Los Angeles family law attorney who can be your advocate during this process. Not only do you want to make sure your divorce agreement is in your best interests but also the way your family business is dealt with.
To give readers a better understanding on how to keep a family business out of a divorce, our California divorce attorneys are providing a review below.
Options for the Family Business in a Divorce
It’s common for spouses to work together and start a business, but when you add a family business into a divorce agreement, the process becomes more difficult. There are specific details that will need to be decided when you own and operate a business with your spouse, but there are several options to consider.
When a divorce is pending, there are several options for the family business. There are no cookie-cutter answers, and each individual couple must determine what works best for their relationship, their finances, and their goals.
It is essential to have a solid understanding of each option and how it will impact your life moving forward before reaching a decision.
If neither of you wants to give up the business, you could still continue to co-own it and run it together. This, of course, will be highly dependent upon your ability to work together amicably. A business valuation will not be necessary if you choose to continue your co-ownership as your business assets and separate from the marital assets in this scenario.
If you have the ability to maintain a professional relationship, then both spouses could retain their business interest. Obviously, this requires working closely with your ex-spouse and finding a way to have a good working relationship.
Sell or Buy-Out Half the Business
Couples who do not think they can continue co-ownership of a business can consider the option of one spouse selling their half of the company to the other spouse. Under these circumstances, the business is regarded as an asset to the marriage. You will need to hire a business appraiser to determine the value of the company.
Once a value has been determined, one spouse can buy the other spouse’s half of the business, or they can agree to forgo other assets in exchange. If you decide on this option, it is best to let your family law attorney in Los Angeles help you with your negotiations.
There’s one caveat to this arrangement. If the spouse who bought the other half of the business is paying the other spouse alimony, the spouse receiving the alimony is likely double-dipping.
In many cases, a judge will not allow a spouse to receive alimony based on the profits of a business that was considered community property in a divorce. For some couples, selling the business makes the most sense. It simplifies the divorce and can help avoid additional issues in a divorce.
You may still want to hire a business appraiser to help you put a price tag on it. After it sells, you and your spouse split the profits evenly and go your separate ways.
What about a Business Owned Prior to the Marriage?
Businesses that are older than the marriage can be a little more challenging to manage in a divorce. If your business predates the marriage, it will likely be entitled to a separate property part. Factors that determine how much you will be entitled to include:
- How long before the marriage the business began
- The assets and profitability of the company was before the marriage
- The value of the business was at the time of marriage
- If the company has become more valuable, less valuable or has the same value as it did at the time of marriage
- If the value change resulted from community efforts (your time and/or money invested into it during the marriage and from community sources) or from other factors like market conditions
Seek the Help of a Divorce and Family Law Lawyer in Los Angeles
No matter which option you and your spouse choose, our attorneys are here to support your desires and help your plans come to fruition. If you are able to reach an agreement independently with the spouse regarding the division of property and assets, including the family business, you could save a significant amount of money.
Our experienced divorce attorneys will guide you through each step of the divorce process and help you determine you determine what property and assets you are entitled to under California’s divorce laws.
The vast majority of property and asset disputes can be resolved outside a family law court through arbitration or mediation. Any complex division of property and assets issues are frequently debated in a California divorce. These types of disputes can last for several months and get very expensive for both parties.
A Los Angeles family law lawyer from our firm can advise you on the best course of action to meet your divorce and business goals. Our attorneys have assisted numerous business owners who are going through a divorce. Our experienced divorce attorneys will provide support and guidance as you work towards ending your marriage and determining the best course of action for your business.
Furman & Zavatsky is located in the San Fernando Valley area of Los Angeles County at 15821 Ventura Blvd #690 Encino, CA 91436. Contact us for a free case evaluation at (818) 528-3471.