Having a company and earning a substantial income from it is a blessing. However, in the context of divorce, a business can potentially become an issue. If you have a business together with your partner, how will it be split up during the divorce?
California laws on property division
California is one of the few states that follow community property law. Rather than fair or equitable property division, the state follows equal division. Any asset considered marital or community property will be divided 50/50.
The 50/50 property division rule will apply to any business owned by divorcing couples, provided it is considered community property. Even if you contribute more to running or financing the business than your spouse, it will still be divided evenly.
How can your business be split 50/50?
Community property states generally divide a joint business by awarding each spouse an equal share of the business and its assets. This can result in you and your former spouse continuing to run the company together.
Since staying together as business partners after the divorce may cause friction, you may consider the following options:
- Buying out your spouse: If you have the financial capacity for it, you may purchase your spouse’s half of the business and become the sole owner.
- Selling the business: You and your spouse may choose to dissolve or sell the entire business and split the sale proceeds.
- Give up other assets for the business: You may give up your share of other marital assets, such as real estate or investment accounts, in exchange for the business.
Accurate asset valuation is key
Whichever option you choose, it’s crucial to give an accurate report of the value of your business. Doing so will help ensure you and your spouse get an even share during property division.
Contacting an expert family law attorney may also facilitate a smoother divorce process. A lawyer experienced in handling high-asset divorces will know how to appraise businesses, correctly classify property and even help identify hidden assets.