How do you manage the community interest in a business during a San Diego divorce? What are the options available to the owner of the business and/or their spouse?
The first step is to establish the value of the marital interest in the business before the Court. The process, known as “valuation,” usually involves certified appraisal expertise and can be ordered by the parties or the Judge. In some cases the parties work together to select an independent expert to establish valuation. In others each party hires their own appraiser. In these cases the appraisals are usually quite different based upon the interests of the party who hired the appraiser. If the Court orders the valuation the Judge can assign the cost to either or both of the parties.
Once the valuation has been established the parties must negotiate or mediate a resolution or the Court must determine how to manage the community interest in a business. There are multiple options which include but are not limited to:
Close or Sell the business – It may be time to close the company and sell off all remaining assets and retire associated debts. The parties would usually split the remaining proceeds. Another common strategy is to sell the business and divide the resulting proceeds.
In some cases, especially when both are working in the business, the best strategy is to keep the business going and run it together. This usually requires parties who are at least neutral toward one another if not amicable. A contract establishing the interests of each separate party going forward, percentage of interest, voting rights and division of revenues should be negotiated and submitted to the Court for review and approval. In rare instances, the former spouses may choose to continue business operations but hire a new management team to remove themselves from daily operations.
Another common strategy to manage the community interest in a business during a San Diego divorce is for one of the parties to offset the community interest of the other party with other community assets, a new business loan or a secured interest in the business. In effect, the business owner buys out their former spouse’s community interest in the business.
What is the best strategy for dividing the community interest in a business? Should you consider a postnuptial agreement to stipulate the outcome prior to beginning the divorce itself? These are legally and financially complex questions regarding the experienced, proven and sound counsel of the Certified Family Law Specialists at Burke & Domercq.