Divorce is never an easy experience to go through. Aside from the emotional toll it gives for the whole family, you and your spouse must also navigate the complexities of your property division process.
In this blog, we will discuss how the California courts divide a family-owned business during a divorce.
How are assets like businesses divided in a divorce?
California is a community property state. Under this property division model, all property and debt owned by either spouse during the marriage is divided equally. This means that if you and your spouse bought a business together during your marriage, the court will view it as a community property.
However, if you bought a business before you got married and you were able to manage it as a sole proprietorship without receiving any financial help from your spouse, your business may remain as a separate property.
How can financial appraisers help?
To divide a family business fairly, the court will need to establish the market value of your business. In this process, you and your spouse will need to hire a team of financial experts that can efficiently appraise your business and determine its real value.
Depending on the type and size of your business, your team may be composed of Certified Public Accountants (CPAs), tax professionals, real estate appraisers and business valuation analysts.
What happens after the appraisal process?
After the team completes your business appraisal, you and your spouse can work on a settlement agreement that confirms how you both want your family business to be divided. You may choose from these three options:
- Co-ownership: You can continue to run your business together as business partners or co-owners.
- Buyout: One of you will purchase the other party’s business shares and become the sole owner of the business.
- Sale of business: You and your spouse agree to sell your business as a whole and divide the profits equally.
By understanding your rights and seeking the assistance of financial advisors, you and your spouse can determine your family business’ real market value and discuss how you both want to move forward with your business division process.