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Things to Consider when Dividing a Business During Divorce
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Things to Consider when Dividing a Business During Divorce

On Behalf of | Feb 5, 2019 | Divorce

When it comes to finances and divorce, there’s often no ideal outcome for both parties. If you and your spouse owned a business together, things can get even trickier. San Marcos Family Attorney John Griffith notes, “It can be very difficult to ensure a fair division of property, especially if you’re also splitting a business apart.”

To begin the process of finding out who gets what during the divorce, as far as your business is concerned, a few things must be determined. First among these is what type of property your business is considered.

What Type of Property Is Your Business Considered?

Under California law, there are three types of property during a divorce: community, quasi-community, and separate. (There is even another type, termed “commingling,” which is a combination of community and separate property.) When severing personal and professional ties from your ex, it’s best to consult with an experienced divorce lawyer, as each case is complex and unique.

Says Griffith, “When you’re dividing assets between your spouse, there can be a lot of grey area that gets tricky during the divorce proceedings.”

It’s common for courts to calculate the contribution percentage of each spouse to determine the appropriate allocation of assets.

To decide whether your business is considered community or separate, the following factors will be considered:

  • The date of your marriage
  • The date of valuation of the business during the divorce
  • The source(s) of the business’s funding
  • Each spouse’s business contribution

What Will You Do with the Business After the Divorce?

“While there is no normal outcome for splitting a business during a divorce,” notes Griffith, “there are several common options.”

Usually, if your business is determined to be community property, one of the following scenarios will occur:

  • Both you and your ex-spouse will continue as co-owners of the business. This may not be ideal, but it is equitable. If you and your ex part on amenable terms and are willing to keep the business alive, this might be a good option for you.
  • The business will be sold and you and your ex will divide the profits. If you and your former spouse decide that you don’t want to keep the company, it may be best to sell it and simply split the profits down the middle. If there is any bitterness or resentment during the divorce, this might be the fairest option.
  • One spouse will keep the business and the other will take his or her share (often in the form of other assets). If one of you wants to keep the business but the other doesn’t, this is another choice for a fair division. After your company’s value is determined, one spouse can basically buy out the other’s half.

As always, it’s best to seek professional advice on these matters, especially since there are so many intricacies involved in each case. Your lawyer may be aware of loopholes or special exceptions of which you may not be aware. It’s to your advantage to have your case handled in the most diligent manner possible.

Whether or not you’re dividing assets during your divorce, the proceedings can be daunting. For expert counsel, schedule a free consultation with John Griffith and his San Diego-based family law firm today in Carlsbad, CA. With skill and professionalism, the team can connect you with all the resources you need to get through the divorce as smoothly as possible.