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Managing Your Small Business Through a Divorce

On Behalf of | Aug 14, 2019 | Professional Practice & Business Ownership

Managing your small business through a divorce will be a challenging process.  There are so many concerns on your mind regarding the divorce, child custody and what will happen to your business?  How is a small business handled in a divorce?

If you owned your small business prior to getting married and have not used any marital funds to support the business it may be substantially separate property.  If you acquired the business during the course of your marriage, or have used marital funds to support it the asset will be considered as part of the community property settlement.  In California, each spouse is entitled to half of the commercial property settlement.

Generally speaking you will need to compensate the community for your spouse’s marital interest in the business if you wish to hold sole ownership after the divorce.  Usually the spouse’s interest in the business is offset with other community property such as equity in the family home, investment accounts or other assets.  It is not uncommon to negotiate a secured debt instrument to pay off any remaining value over time.

The business must be appraised and each side will usually present a “valuation” which establishes the present value of the business and the process used to calculate the valuation.

Managing your small business through a divorce also means you can’t move money or assets out of the business in an attempt to reduce its value.  You have a fiduciary responsibility to your former spouse and any attempt to hide assets or money will result in stiff sanctions from the Court up to and including the forfeiture of the business itself to your former spouse.

Keeping operations as smooth as possible is always a challenge during a divorce.  You’re emotions are up and down and the distraction of your divorce may have an impact on your business.  Judges understand this.  However, any deviations in business will be carefully scrutinized as opposing counsel seeks evidence of an attempt to reduce valuation.

It is in your best interests to preserve the “status quo” not only in your personal finances but in your small business as well.  The experienced Certified Family Law Specialists at Burke & Domercq will help you to protect your interests and business ownership throughout your divorce.  We invite you to contact us or call 760-389-3927 to learn more.