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I Own a Business—What Will Happen During Property Division?

The outcome of your property division case could seriously impact your financial stability for years or even decades post-divorce. As a business owner, you may be wondering how your enterprise plays into your property division dispute.

Understanding things like whether your business is separate or community property can help you make the right decisions as you divide assets and liabilities with your soon-to-be-ex. We're here to give you the low-down on how businesses interact with the property division process in California.

Will the Court Force Me to Divide My Business?

That depends on a multitude of factors. You should consult a property division lawyer to get an idea of how the court will handle your business during your property division dispute.

In short, if you created your business while married, the judge may require you to purchase your spouse’s interest therein or, in less common circumstances, to split business income moving forward or even sell the business and divide the proceeds.

California is a community property state, which means the state splits community assets 50/50 between the parties during a divorce. If you started your business while married, the court will probably consider your business community property. If you started your business pre-marriage, depending on a variety of factors the community may have gained an interest in the business during the marriage.

Of course, there are always exceptions to the rule. For example, if you have a prenup designating your business as separate property, you may not have to divide it with your spouse.

My Business Is Community Property—What Will Happen to It?

The court will ask you and your spouse to evaluate the business and determine how much it's worth. You should each consider hiring a financial professional specializing in business appraisal for this process. You can work together with these professionals to agree on the worth of the business.

Once that's done, you have a few options:

  • Buying out your spouse. The court may allow you to pay your spouse a certain amount of money to buy them out of the business, making you the sole owner. This is usually more feasible if you own a majority of the business and your spouse has a smaller stake or is less involved in operations.
  • Dividing the business with your spouse. It may be possible to split your business with your spouse, even going so far as to rebrand as two different companies (if necessary).
  • Continuing operations as normal. If you're still on good terms with your soon-to-be-ex or trust that you can maintain an effective business relationship, simply continuing to operate as co-owners may be a good option.
  • Selling or dissolving the business. Alternatively, you can sell the business, dividing the profits equitably with your spouse. If neither party agrees on how to handle the business, you can also take the more severe step of dissolving it entirely.

At Bremer Whyte Brown & O'Meara, we can help you pursue an ideal outcome in your property division case.

Contact us online or via phone at (949) 229-8546 to schedule a consultation with our team and learn more.