What Happens To Family-Owned Businesses In A Divorce?

By Gerald A. Maggio, Esq.

divorce mediation orange county; California Divorce MediatorsDividing family owned businesses can be very tough if you and your spouse are not on the same page. And by being of the same page it means understanding how importance the family owned business is. You might be the owner of a business that was passed down to you by your family and suddenly your divorce splits it into two. Your partner may not be interested in the business but despite that gets a half of the business. It can be very disappointing.

Businesses can be viewed as property

During a divorce, businesses are viewed as properties. Two important factors that play a major role in determining this are classification and worth of your business. Your business can be classified as either a community property or a separate property or even both. How much your business is worth depends on the amount of money generated by your business and the net worth of your business.

Equal division of business

If you own a business then you know how much time, effort, and money you have spent to establish your business. Now, imagine if everything that you built were divided in half and one half was given to your wife? Heart-breaking, isn’t it? Well in California this is exactly what happens to your property during a divorce. California, being a community property states, require that every property belonging to the marital “community” be divided in half. This includes family owned businesses as well.

The best solution to save your business from splitting in two would be signing a prenuptial agreement or some other exit strategy cleverly developed by an experienced lawyer. Another option would be to work with your partner in the same business. Both solutions are tough because you need an amicable relationship with your spouse and if you have that why would you be heading towards a divorce then?

Protecting the business

The first way to protect your business is to talk with your partner and agree on some mutual understanding. While talking, you need to keep your personal squabble out of it.

You must get your business valued if you are getting a divorce. If you both are joint owners, doing this is not a problem but if you’re not then things can get complicated.

If you both work in the same business, you can expect both of your roles and responsibilities to change. This reduces conflict of ideas and save the business from utter devastation.

To learn more about the divorce process in California and how mediation can help, please visit our page, What is Divorce Mediation