Is My Business a Marital Asset in a Divorce?
Posted in Divorce on April 5, 2023
Divorce is one of the most difficult things a person faces in their lifetime. It can be very stressful because of the financial uncertainty that each party faces once their assets are divided. If you have spent time building a business, you may be concerned about what happens to it if the marriage dissolves.
Each case is unique, so speaking to a divorce attorney is the best way to understand your options and the best way to protect your finances.
Divorce Means Anything but Business as Usual
You take pride in your business, you have done the hard work to make it what it is today, and you are the one who has spent time growing your business and making sure it was successful. It is your business. That is how it seems, anyway.
The law may view your business differently than you do when a divorce is impending. Businesses that were started during the marriage are considered community property. If this is the case, the business will be included when the marital assets are divided.
Community Property
If the business is considered community property, it will be divided in the divorce. This can be a point of contention for each partner. If you own the company, you may feel that you made the most sacrifices and contributions. Therefore, you should not have to give half of it away.
Your partner may feel that they supported you while you were getting the business off the ground because, eventually, you both would benefit from the business’s success. This often happens when one spouse takes care of the family while the other builds the business. Mutually, the business grew because of direct and indirect contributions.
The Value of the Business
Many businesses cannot survive the division. They require half or more of the valuation to remain solvent. Valuing a business can be challenging. The following aspects must be analyzed:
- Tangible property, or the businesses assets
- Intangible property like trademarks, goodwill, non-compete clauses, customer lists, customer relations, etc
- Assets
- Liabilities like rent, credit lines, loans, outgoing payments, and payments for services
- The company’s profits
Division of Your Business in a Divorce
Because California is a community property state, this means that the marital assets will be evenly divided among the former spouses. A company that was created during the marriage will be considered community property.
If the business were started before the marriage, the company would not necessarily remain the sole property of the partner who began it. The court will consider certain factors. These considerations are as follows:
- Whether both spouses contributed during the marriage
- How the business owner is paid
- The involvement of each partner
- Customer relationships
- Qualifications, permits, licenses, and certifications
- Whether one or the other spouse uses money from family funds to support the business
- The ability of one partner to buy the other partner’s share of the business
- The division of the rest of the marital assets and liabilities
- Each partner’s capability of earning a similar amount of money if they are no longer affiliated with the business
Contact Ratzer | Dobis Today
Discuss your business and how it will be affected by your divorce with one of the family law attorneys with Ratzer | Dobis. Our divorce attorneys are adept at asset division. They will be able to advise and strategize so that your business is protected in the best way possible from the resolution of your divorce.