We are often asked “what will happen to the family business in our San Diego divorce?” Owning a small business or an interest in the family business will be handled as part of the community property division process. The valuation and division of the community property interest in the business is legally and financially quite complex.
The business owner or practicing licensed professional is wondering how they will keep the business going through the divorce. They usually want to make sure they own the business outright once the divorce is completed.
California divides all community property equally between the former spouses. The spouse of a business owner or licensed professional therefore deserves half of the community interest in the business or practice.
The first step in the process to keep the family business in our San Diego divorce is to establish the valuation of community property interest in the business. This is often a contentious process as each side has substantially conflicting interests. The owner of the business wants the valuation to be as low as possible. The soon to be former spouse of the business owner wants the valuation to be as high as possible.
There are many different methods which California Courts will recognize to establish valuation. The nature of the business itself usually establishes the methodology employed by the appraisal expert(s). Once the valuation of the community property interest in the business is established by the Court it must be equally divided between the parties.
How will I keep the family business in our San Diego divorce?
If you wish to keep the family business you must offset your half of the community property interest in the business. In effect, you offer your former spouse an appropriate sum from other assets such as equity in the home, retirement accounts, other investments and assets or even a security instrument of some sort.
What will happen to the family business in our San Diego divorce? It will either be sold and the proceeds divided based upon community property interests, or the owner of the business must provide offsetting compensation to, in effect, buy out their former spouse’s community interest.