Divorce is a complicated process. However, if you’re a business owner, you have concerns beyond personal ones.
A divorce can threaten the future of your company. You may be worried about whether your spouse can force the sale of your business as part of the divorce process.
How California treats businesses in divorce
California is a community property state. Assets acquired during the marriage are typically presumed to be owned equally by both spouses. If you started your business during the marriage, it will likely be considered community property. However, even a business owned before the marriage may be subject to division if any increase in value can be attributed to your spouse’s labor, skill or time.
That doesn’t mean the business itself needs to be divided or sold. Instead, the court typically looks for an equal division of the business’s value. Often, the business-owning spouse will be allowed to retain full ownership and compensate the other spouse for their share. This could be through a cash buyout, structured payments over time or giving the spouse a larger share of the other marital assets, such as real estate, retirement accounts or investments.
California courts usually view forced business sales as a last resort. Judges understand that selling the business can eliminate future income, damage client relationships and disrupt employees’ lives by depriving them of their source of income.
A sale may be ordered if there are no reasonable alternatives. This typically occurs when the business is the primary marital asset and the business-owning spouse lacks the financial ability to buy out the other spouse. The courts are concerned with fairness, and sometimes selling the business is the only way to achieve the desired result.
If you are facing a divorce, you need to work with a legal professional who understands how divorce can impact complex business assets. Their help can be essential to protecting your personal and professional futures.
