Filing for divorce carries some risk of loss for nearly every couple, because the law requires spouses to divide their marital property as a part of the process. In addition, couples divorcing in California must follow community property laws that require them to divide their property equally, where most other states allow an “equitable” division of property, which is more flexible.
These requirements may cause complications in a divorce, particularly if one spouse in a couple owns a business. The law broadly views businesses as property that people may own, like they might own a car or a home. This means that a business owned by one spouse may qualify as marital property that a couple must divide in their divorce.
If you own a business and anticipate your own California divorce, it is important to understand how your divorce may impact your business. With a clear understanding of your priorities and risks involved, you can build a strong divorce strategy to keep your priorities secure and your rights protected throughout the process. However, without a strong legal strategy, divorce may cost you more than you expect.
Protecting your business from your divorce
There are a few different ways to protect your business from the property division process. If you have a prenuptial agreement, be sure to review the agreement carefully. You may have included protections for an existing or planned business in the agreement, which can solve the matter simply.
In the absence of a prenuptial or postnuptial protecting the business from divorce, it is sometimes possible to claim that a business is not marital property, under the circumstances. Courts may agree to exclude a business from property division if the owning spouse demonstrates clearly that the non-owning spouse does not contribute to the business or influence its operation significantly.
If your spouse does not interact with the business, and you can demonstrate this properly, you may want consider making this part of your legal strategy.
Keeping a business intact throughout a divorce
If you cannot exclude your business from your divorce, then it is wise to consider if it is a priority for you to keep the business intact. In some cases, the least harmful option is to use a business as a negotiating tool during property division.
However, if you hope to keep the business intact as part of your long-term plan after the divorce, then you must make the business a priority in your divorce strategy. Your spouse may have a valid claim to their portion of the business’s value, so you may want to have the business professionally valued. This helps eliminate disagreements about a business’s value by creating an in-depth picture of all aspects of the value of a business.
You may find ways to offer your spouse other assets to compensate them for their owned portion of the business. If you do not have enough assets to cover all of your spouse’s portion of the business, you may find a solution involving a structured payment plan to compensate your spouse over time.
However you choose to move forward, it is wise to build a strong divorce strategy using high quality legal resources and guidance. Building a divorce strategy helps identify your priorities and the challenges you face, keeping your rights secure while you close one chapter and begin another.