Q. How is My California Business Divided in Divorce

A. How your business is divided during a divorce in California will depend on a number of factors.

California is a community property state, so the value of the business will be determined and each partner in the marriage will be entitled to half of the assets. Who gets control over the business once the divorce is final depends on who was running the business and the level of involvement of the other spouse.

Determining the Level of Involvement Your Spouse Has in the Business

If your spouse does not have another job, has the ability to sign contracts, and their name is on the registration documents, your spouse is considered involved in the business. If you run the business, yet your spouse is on the payroll, it is clear to the courts that your spouse is employed by the business. If you are the driving force behind the success of the business, you may have to prove this to a judge in order to keep control of it.

Your Business is a Private Practice

If you are a doctor, therapist, or any other service provider where the business relies on your education and expertise, your business is considered a private practice. While your spouse may be actively involved in the business, answering phones or making appointments, it is clear that the business only exists because of your level of education and experience. Your business will still have to be valuated, but you will retain control over the business once you divorce your spouse because it can’t exist without your credentials.

Get Your Business Valuated By a Third Party Vendor

While determining final control over your business is one aspect of a California business in divorce settlement proceeding, establishing the value of the business is also necessary. A hired certified public accountant will review the business records, looking through debts, assets, and any other records to determine how valuable the business is. Future earnings are taken into consideration. It isn’t cut and dry to valuate a business, and only a third party vendor will be able to establish the final value of your business with neutrality.

If you have considerable business assets and you are getting ready to file for a divorce, it is important for you to consult with a California Family Law firm before you file. As a reputable San Diego divorce lawyer, we will be able to help you get your business affairs in order before your official divorce paperwork is filed. While you will still have to divide assets with your spouse, ensuring that the business remains under your control should be your primary goal.

All assets and debts in a divorce in California are considered community property, and they are shared equally among the divorcing spouses. Determining who should have control of the house, property, business, and other assets will get complicated. If you and your spouse are not able to come to any agreement without going to court, you will have to be prepared to fight for what is rightfully yours.

Before filing for divorce, gather together all necessary documentation that proves you are the primary owner of the business in question. Consider that you may have to buy out your spouse for their share of the business once the business has been valuated. You will maintain control of your business if you are the rightful owner.