What Happens to the Family Business in Divorce?

Getting a divorce can be complicated. From determining child custody and support to deciding who gets the home, matters can easily become heated and contentious. What happens when a family business is involved in the separation? What can spouses turned business partners expect in property division?

The bottom line is that California treats a majority of the property obtained in marriage to be community property. This means that it will be divided evenly between both spouses. When it comes to a family owned business, even if one spouse is leading the charge, the other still is entitled to half the value. However, that doesn't mean every cases is handled by doing a 50/50 split of the business. While property as a whole is divided evenly, that doesn't mean each individual asset will be.

How can I protect the business before divorce?

If spouses own a business jointly and contribute equal amount of time to it, it is likely that the court will require them to split it evenly. This may involve them selling it off and splitting up the value or the practice, trading off on other assets, or one spouse buying out the other one, depending on the circumstances.

There are some ways to prevent a messy division of a family business though. One of the simplest ways to do this is to create a "business pre-nup," just as a couple would create a marital one. While this may not seem so appealing to spouses at first, taking these precautions can go a long way in the success of a business down the road. If it is going to be a serious and protected business, both spouses must act as partners and create a plan for what to do if division were to happen.

What can I do when already facing divorce?

While it can be complicated, taking steps ahead of time can help couples move through a divorce more efficiently and preserve the hard work they have put in to build up their business. If you are facing divorce and unsure of how your growing business will be divided, you can reach out to one of our family lawyers for counsel. Our team can work with you to determine the value of your business and what steps are in your best interests. If you haven't created an agreement ahead of time, having legal counsel and protection is crucial during this time. Schedule a free consultation with our team to learn more about your options.