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Division of Marital Assets

How Divorce Affects a Family-Owned Business

By December 23, 2011February 28th, 2014No Comments3 min read

When a couple owns a business together, the dissolution of their marriage or registered domestic partnership has the potential to seriously harm their business. Because the business is likely to be one of the most valuable assets the couple has, protecting the business during the dissolution should be a joint priority.  Both parties need to remember that unless there was a written agreement that the business would be the separate property of one of the parties, the community property will include the amount by which the business has appreciated during the marriage, and each of them will own half of that amount.

One of the first steps should be for one or both parties to hire a valuation expert, who can determine the value of the business at the time the parties separated.  From that value will be subtracted the value of the business as of the date the parties were married, or the date the business began, whichever is later.  Since California is a community property state, each party will own 50% of this value, which represents the business appreciation during their marriage. (If the business becomes substantially more or less valuable during the divorce proceedings, a reappraisal will be needed.)

The business does not need to be split down the middle so that each party can receive 50% of its value. Both parties may want to continue running the business together, or one party may wish to keep running the business, while the other party’s interest in the business will likely end with the divorce settlement.  If the parties jointly managed the business while they were married but cannot agree on whether both or either of them will run the business after the divorce, it may be possible to craft a creative solution that involves hired managers or spinning off a portion of the existing business into a separate business.  And because each party is only entitled to 50% of the total value of the community property, the court may choose to award the entire business to one party, and give assets of equal value to the other.

During the divorce, the business will be classified as community property.  If one spouse or domestic partner is managing it, that spouse is required by law to act in the best interest of both themselves and the other party, and to fully disclose all of their business decisions and not conceal any debts or assets.

Call Minella Law Group to Protect Your Business and Financial Rights During a Divorce

The experienced divorce lawyers of Minella Law Group can provide sound legal guidance to protect the health of your California family-owned business in a divorce or domestic partnership dissolution, while also protecting your personal rights to receive your full share of community property assets.  To set up an appointment, please call Minella Law Group today at (619) 289-7948.  We look forward to helping you.

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