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How business ownership affects divorce

The fact that nearly half of married couples in California and across the nation will experience divorce at some point means that asset division will become a necessary process for many people. When a business is part of a marriage, property division during a marriage dissolution becomes more complicated.

The steps necessary to protect business earnings during a divorce should begin well in advance of problems in a marriage. These steps are relevant whether the business owner is a CEO, majority shareholder, board member or another individual who benefits from any profit-bearing position with a company.

The financial implications of a divorce can become drastic if not addressed in the right way. The reason is that all assets and income accumulated during a marriage are defined as marital property. California’s status as a community property state means that both spouses possess a legal right to 50% of a business regardless of which of them started or owns a company.

Maintaining a business requires a lot of work under the best circumstances. This work can become more difficult when a business owner must deal with lawyer meetings and court appearances that often accompany the divorce process. The chaos that can occur when an ex-spouse becomes an uninvited partner is also a point to consider.

Some business owners have used prenuptial agreements to avoid the problems mentioned above when a marriage fails. It may also help to keep other property owned by the couple unattached to the business. For example, the spouse with business aspirations may find it better not to take out a mortgage on a jointly owned home to fund their business.

Protecting a business when during a divorce may take great effort for people living in a community property state like California. The best bet for business owners who find themselves in this position may be to secure the services of a family law attorney as early in the process as possible.