You may have built a thriving family business as a couple, putting considerable time, money and energy into its success. Now, as divorce looms, you’re confused about what will happen to it. Does it mean shutting the business down? The short answer is no.
The end of your marriage does not have to be the end of your business. Before delving into what could happen, it helps to understand how marital assets like family businesses are divided.
California is a community property state, and assets acquired during the marriage are split 50/50. If the business was started during your marriage, it will be considered a marital asset and subject to equal division. However, things aren’t always straightforward. For instance, if one of you owned the business before marriage or inherited it, those factors can influence how it’s divided.
Explore your options
There are several ways of saving the business from closure. First, one spouse can buy the other’s share and retain full ownership. If you can’t offer your spouse a lump sum amount, you could trade other assets of similar value, like the family home, to make the settlement fair.
If you cannot buy out your spouse or they are unwilling to sell their share of the business, you may continue to operate the business as co-owners. This requires a clear agreement and mutual respect, but it can work if you both remain committed to the business’s success.
The last option is to sell the business and divide the proceeds. It may not be what you originally envisioned, but it can be the only way of going about things if other options are impractical. Getting an informed evaluation of the unique circumstances of your situation before the divorce process begins can help you confidently navigate such complexities while looking out for your interests.