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Options for dividing a business in a California divorce

by | Apr 19, 2021 | Asset Division

When you own a business, divorce becomes a bit more complicated. On the one hand, California law treats a business the same as any other asset when dividing marital property in a divorce. On the other hand, a business tends to be much more complex than other types of assets. Once you determine that your business is part of the marital estate and subject to division, you will need to decide what to do with it. Before you do that, however, you need to know what the business is worth.

Proper valuation of your business

Because of the complex nature of a business, you should always have a business professionally valuated, similar to an appraisal. Many companies provide this service, and often your divorce attorney can recommend one.  They will look at all aspects of the business and render an opinion on its value specific to your business and your situation. Once you understand its value, you can review your options going forward.

Neither of you wants to keep the business

You may decide that now is the right time to close the doors on your venture or sell it to a third party. Perhaps it reminds you both too much of your past and you would rather move on. Maybe it is simply no longer profitable. Whatever the reason, if neither of you wants the business, you can attempt to sell it. If that is not financially feasible, you can liquidate the assets and close up shop.

You both want to keep running the business together

Though rare, some divorced couples may choose to continue running their business together. If your divorce is particularly amicable and your relationship problems did not spill over into the workplace, this might work for you. You must both be in agreement in order for this to work. You should document the agreement in writing.

One of you wishes to buy out the other’s share

Perhaps the most common way to deal with a business during divorce is for one of you to purchase the other’s interest in the business. This method makes particular sense if the business is based on a professional service, such as law or medicine, where the owner must have a special license that applies to only one of the spouses.

Even with other types of businesses, however, often one spouse is more invested in its creation and daily operation than the other. The uninvolved spouse may have little interest in owning the company but is still entitled to a share of its value. The purchasing spouse need not necessarily buy out the selling spouse with cash. You can offset your share of other marital property with a larger interest in the business.

If you both want the business, but do not want to run it together and cannot agree on how to make the split, the court will make the final decision for you. You will need to rely on your attorney to make a compelling argument on your behalf regarding why you deserve to be awarded the business.

 

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