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Pre-Planning Can Protect Your Business During a Divorce

On Behalf of | Aug 6, 2020 | Professional Practice & Business Ownership

Did you know that pre-planning can protect your business during a divorce?  One of the most challenging issues for business owners and professionals in practice is the valuation and division of a business interest.  Here in California, all community property (property which was acquired or supported with marital funds) must be divided equally between the spouses during a divorce.

How does this affect a business owner?  If the business interest was acquired prior to the marriage, and no marital funds were used to support the business it will in all likelihood be considered to be the “separate” property of the business owner.  However, if a licensed professional took an interest in a practice group, or a business was started or acquired during the course of the marriage the asset is considered to be “community property” which must be equally divided between the parties.

Business owners who are contemplating a divorce are very concerned about the impact of the divorce on the business itself, and often ask how they can protect their company or partnership through the process of the divorce.

One option to consider is a post-nuptial agreement.  A post-nuptial agreement is simply one which is reached between the spouses after the date of their marriage and before the date of their divorce.

The post-nuptial agreement could be used to resolve challenges associated with the valuation of the business interest as well as how the community property interest in the business is to be managed.

The agreement could specify the manner with which the non-owner’s portion of the community property would be offset by other assets.  It may also be possible for the business to obtain a loan which could be used to liquidate the non-owner’s marital interest in the business.

Pre-planning can protect your business during a divorce however, the associated legal, financial and tax issues are quite complex.  This is why it is important to work with the experienced Certified Family Law Specialists at Burke & Domercq.

Protect your business and financial interests and contact us or call 760-389-3927 to schedule an appointment for a remote or socially distanced consultation with one of our experienced Certified Family Law Specialists.