Frequently Asked Questions about California Divorce and Business Ownership
When you have a business and divorce becomes inevitable, you need the expertise of a San Diego divorce lawyer. That way, you can determine the best way to handle California divorce and business ownership in your particular case. With the right California family law firm, you can address business ownership and marriage dissolution the right way and get your questions answered. These questions can include concerns such as the following:
1). How are business assets divided?
Business assets can be divided in two ways: the spouses can come to an amicable agreement, or the judge can decide who gets what. The first option is generally the better of the two, but it is also not always possible for the spouses to agree on who is going to receive all or part of a business’s assets and liabilities during divorce proceedings. California divorce and business ownership can be a complex issue to navigate and requires the services of a good attorney who is used to handling those types of cases. How long the business has been owned and whether both spouses have been active in that business can affect the division of assets.
2). Can one spouse be bought out of a business?
Theoretically, yes. If a spouse is supposed to receive half of the business, it is possible for the other spouse to buy them out if both spouses agree. Generally, the amount that would be required to be paid would be much more than just the cost of half of the business based on the business valuation. The reason for that is that the business will continue to generate revenue, and the spouse who is bought out would miss out on that revenue due to not being party to the business any longer. The current value of the business plus what the spouse could have expected to earn may be required to be paid. Of course, this will also be minus the debts or liabilities of the business, as well.
3). Who gets the final say in the division of business ownership during a divorce?
The final say always comes from the judge. That is why it is so important to make sure that the facts can be presented properly. The more knowledge the judge has about how the business has been operated, the better decision he or she can make when it comes to dividing the business during a divorce. It is possible that the business will be solely granted to one spouse or the other, but it is more likely that there will be some division of it between the spouses, especially if they were both active in it, or if the business has been owned for a long time during the marriage.
4). What steps can be taken to protect a business from divorce losses?
Protecting a business can be accomplished based on how it is initially set up and how much both spouses work at the business. If one spouse primarily owns and operates the business, and that is provable, that can provide more protection. It is best to keep only one name on the registration documents, contracts, business cards, and other identifying features of the business in order to ensure that the business can be owned by only one spouse in the event of a divorce. This is not always possible, however, especially if divorce was never expected and comes as a surprise to the unsuspecting spouse. Issues about how to divorce-proof your company.
Q. What Do I Need To Know About Business Ownership and Divorce Proceedings in California
A. If you are preparing to file for a divorce, or a domestic partnership dissolution,
it is important to consult with an experienced San Diego divorce lawyer before filing your paperwork. If you are a business owner and you are concerned that the business can be controlled by your ex, only a qualified California family law firm will be able to help you sort through the complexities of the process.
It Has to Be Determined if the Business is Community or Separate Property
In the state of California, all community property of the marriage or domestic partnership is divided up between the two parties in a marriage settlement agreement. Not all property owned by one party is considered community property. Assets that were inherited by one spouse or assets that were earned prior to marriage are considered separate property. If you owned a thriving business prior to getting married, the business is your separate property and will be treated as such in a divorce proceeding.
You and Your Spouse Started the Business Together
If you and your spouse started the business together, you will have to decide if you want to be the one to continue running the business. As a piece of community property, both parties are entitled to half of the value of the property. If you are both on the registration paperwork, and you both have a say in how the business is run, you will have to buy out your spouse in order to retain control of the business.
The Business Is a Family Business You Inherited from Your Parents
If the business you are concerned about is a business that you inherited from your parents, your ex is not entitled to half of the business assets. If you have been wise, and you have kept your business completely separate from your marriage, then the business you inherited is yours to keep. If you added your spouse to the business incorporation paperwork, gave your spouse a title, and allowed your spouse to have control in the business proceedings, they may be entitled to some of the assets. If the business grew as a direct result of your spouse’s involvement, it is likely that this will be taken into consideration.
As with any divorce that involves a business, your business value will have to be determined by a third party. An accountant or valuation team will consult all of your business records and determine what your business is worth at this time. Future earnings are always considered when valuation is determined, and your current success in your business can result in a higher payout to your former spouse.
When you are concerned that your spouse is going to be able to control your business assets, it is best to get prepared before filing for your divorce. Encourage your spouse to find other employment and remove responsibilities from your spouse if at all possible. Gather together information that proves you are the primary business owner and allow a third party to come in and assess your business for the court system.
Q. What Happens with Domestic Partnership Divorce and Business Ownership
A. The guidelines for a Domestic Partnership Divorce (with Business Ownership)
The guidelines for a domestic partnership dissolution are similar to those set for a heterosexual couple that has decided to file for a divorce in the state of California. If you own a business together, or you have a significant amount of assets that you earned as a couple, it is important to seek the services of a California family law firm to help you establish how to divide your assets as you end your marriage. Even if your separation starts out amicable, it’s crucial to divide your property accurately and fairly.
Assets Brought to the Marriage are Considered Separate Property
If you had a house, a business, a trust fund, or a large bank account before you entered into a marriage or a domestic partnership, these assets are considered separate property. As you dissolve your marriage or domestic partnership, you will be asked to list all of your debts and assets as part of the proceedings. Anything that you kept clearly separate from your spouse throughout your marriage will remain yours, as long as you can prove you are the first and only owner.
Businesses Started by Both Parties will be Divided Equally
As a business owner looking for options to end a marriage or domestic partnership, it will be in your best interests to hire an experienced San Diego divorce lawyer to help you go through the process. If both parties of the marriage or domestic partnership started a business together, each will be responsible for debts that were incurred as well as any assets that have been established. The business will have to be valuated by a third party resource, and if either party wants to keep the business, they will have to buy out the other party to do so.
The Business Can’t Exist Without You
Final control of your business should be your main concern. While it is only fair that your former spouse is compensated financially for their contributions to the success of your business, if the business can’t exist without your expertise, you will be the one that retains final control of the business. If you are a solo practitioner of medicine, a therapist, or you run a business that relies on your education and expertise only, you are the reason the business exists in the first place. Your former spouse isn’t going to be able to take over a medical practice (unless they also have the same education), so it is reasonable that you will retain control of your business.
Whether you are divorcing from a marriage or you are breaking up a domestic partnership, both relationships are a legal entity recognized by the California courts with established guidelines on how each are dissolved. When you are concerned about a business that you own and you aren’t sure how the asset will be divided, it’s time to consult with a California family law firm experienced in divorce proceedings and same-sex domestic partnerships that are dissolving.
Q. How do I Divorce-Proof My Company?
A. There are many issues to focus on during a divorce, including what will happen to your business and its assets and liabilities.
If you have a company of any kind, you will want to make sure you are protecting it in the best way possible, just in case your marriage fails at a later date. Fault does not matter, nor does the length of time you have been married or other circumstances surrounding your divorce. What matters is taking the time to divorce-proof your company from the time of its very creation, so you do not have as many worries to contend with if divorce becomes inevitable.
Your divorce business valuation can be vital, as well. If you want to protect your business from losses during a divorce, the valuation on that business has to fit with the other assets and liabilities that are being divided between you and your spouse. If you get a lot of the assets, you may also get a lot of the debt. That is something for which you must be prepared. However, if your business has a lower valuation, that can mean carrying a lower debt level, as well. This can benefit you in the long run and make it easier – at least financially – for you to move forward after a divorce.
A San Diego divorce lawyer can help you determine what you need to do in order to make sure your business assets are protected in your divorce settlement. That is why a California family law firm is so important to consult with as soon as you determine that you will be divorcing. If there are changes that need to be made to your business at that time, advice can be given to facilitate that. Setting your business up to be divorce-proof from the beginning, though, is the best way to ensure that you will be protected financially and professionally, no matter what takes place in your personal life.
Determining who gets the debt when a marriage ends can become a significant part of divorce business valuation. There are two ways that who gets the debt is typically decided.
1) One is that the debt is evenly distributed based on the distribution of the assets.
2) The other is that the level of debt taken on by both parties is affected by whether the debt was originally intended to benefit both of them. This is often the case with business debt because taking on more debt to get a business off the ground or allow it to grow can provide a large benefit to both parties in a marriage.
In the divorce cases involving business ownership, it may be unreasonable to assign that debt to only one partner because the value of that debt was much more than just one partner taking on debt for something he or she wanted to buy. Instead, the debt was used to better the lives of both parties to the marriage in a significant way and may have also benefited children and relatives.
Q. How will my divorce affect my business?
A: Divorce can be a very messy and complicated situation,
especially if there are children and substantial assets involved. The family unit is broken, and property and debts become the central focus of the proceedings. The stakes are high in these instances, so seeking advice from a San Diego divorce lawyer should be the first move you make. In California, property and debt are divided based on the decisions of the court. Getting proper counsel from an experienced California family law firm can assist in preparing your case and providing effective representation to benefit your best interests.
Can a California divorce affect my business?
In California, businesses are considered assets and will be divided based on whether or not the business is separate or community property. There are certain complications that may arise when businesses are involved, such as whether or not the business was owned prior to the marriage, whether it was inherited, and how much time and effort both spouses put into the business to make it thrive.
The couple may be forced to divide the business or sell it to keep things fair. For some, this may or may not be an option if it is the sole source of income for one or both parties. One party may also be awarded the business with the stipulation that they have to pay for the spouse’s community share. Determining the value of a business will require accountants and appraisers to come to a reasonable value by which the sums will be granted.
Dividing property, debt, and assets is a detailed process that requires the knowledge and expertise of a California family law firm that can work on your behalf. Other factors that may affect your business in a divorce include:
~Who is perceived as the primary principal of the business
~Whether or not both spouses are on the registration documents
~How much time has been dedicated to the business from both spouses
~What is the history of the business
~Whether or not a prenuptial agreement is in place
Q. Is my wife entitled to half my business if we divorce?
A. If you own a business, divorce can be more difficult financially than for those who are employed by others.
You may be asking yourself, “What are my rights in California divorce proceedings?” To get answers, you will want to talk to a San Diego divorce lawyer. That way, you can get clarity about where you stand and how your business’s assets and liabilities will be handled by the courts. Reaching a settlement out of court is the best choice, but it is not always realistic.
If you must have a judge determine who receives what—both assets and debts—you want that judge to have all the facts about your case. Then, he or she can more easily determine whether you should receive all of your business, or whether your spouse is entitled to a portion of it, up to and including half of it. There are, however, some ways in which you can get a better idea of whether you may have to give some of your business to our spouse before your appointment with a California family law firm.
The Judge Will Make the Final Decision
Even though the judge will be making the final decision, you want to know what to expect. Making things as amicable as possible is also important, but that can be difficult if you don’t have the facts to present to your spouse when attempting to reach an agreement. To determine what may happen to your California business in divorce proceedings, consider the role your spouse plays (and has played) in the business itself.
Does your wife have an active role in the business? If so, there may be more of a chance that you will be required to give a percentage of the business to her when you divorce. If you want to keep your business all to yourself, you may have to buy out her portion. That can also be done, but it would naturally be better for you financially if that wasn’t necessary. How much of a role she played and whether they have been active in the business for a long time can also affect whether you will be required to divide the business with her.
To protect yourself, it is best to have only your name on the business, the registration documents, and any contracts the company has with others. However, it is not going to be realistic to change those things just because a divorce is on the horizon. If you have shared the business closely with your wife for many years, it would not be realistic for you to expect to retain it all when you divorce. If she has never been involved with it, and it has always been solely your business, this could be much less of a worry.
Q. How do I Protect My business in a Divorce?
A. If you are considering filing for a divorce but you are concerned about your business,
you need to speak with a California family law firm before you file any paperwork. If you are the primary owner of the business and your spouse has been completely separate from any business proceedings, you should be able to protect your business as you go through the process of a divorce.
Property Division During a Divorce in California
Property is considered separate property, community property, or a combination of the two. Each party retains their separate property, community property is divided equally, and property that is deemed a combination of the two is divided equitably. If you have been running a business that you started prior to your marriage, you should be able to retain full control of the business once your marriage has been dissolved.
The Easiest Resolution May Be a Buyout of the Other Party
If you are concerned about business ownership and divorce proceedings, the easiest way to resolve your differences is to agree to a buyout of the other party. If the process of divorce is having a negative effect on your business, it is time to come to a reasonable agreement so that you can focus on running the business. If a buyout isn’t possible, you should consider offering a percentage of the revenue stream until a buyout of the partner’s stake in the business is possible.
Gather Evidence that You are the Primary Business Owner
If you have been the one to work the business, if it was your ideas and capital that started the business, you need to gather this proof. If your primary goal is to continue to run the business, you need to prove that the business would not have existed without your time, talent, and money. While your former spouse may be entitled to financial compensation, it will be in your best interest to retain control over a successful business. You have worked hard to build up your business, and you should be the one that continues to reap the benefits of your hard work.
When you are ready to file for divorce and you are concerned about your business, it’s time to sit down with an experienced family law attorney to discuss your options. You can retain control of your business as long as you were the one running the business in the first place. If your former spouse wants control of the business, you will need the power of an experienced lawyer behind you.
California – Community Property is Divided Equally
In California, community property is divided equally. Establishing that your business is community property will be the first goal of your former spouse. If you can prove that the business is at least partially separate property, the asset will not be divided equally.
Your business will need to be evaluated by a qualified resource that will come in and look at all of your business records. Your business assets and liabilities will be established, and any value in your business is subject to division between you and your former spouse. Getting your business qualified as separate property or at least partial separate property is the best way for you to secure control of your business over time.
Additional FAQs You May Find Useful:
- What Do I Need To Know About Business Ownership and Divorce Proceedings in California
- What Happens with Domestic Partnership Divorce and Business Ownership
- How do I Divorce-Proof My Company?
- How will my divorce affect my business?
- Is my wife entitled to half my business if we divorce?
- How to Protect My business in a Divorce
