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What happens to a business in a divorce?  

On Behalf of | Aug 10, 2022 | Divorce

Couples in California may acquire many types of assets during their marriage. They also have different types of jobs to earn income and make their livings. Sometimes these two aspects are combined when people own their own businesses. If the couple ends up going through a divorce this can create complications.

Businesses are considered assets and need to be divided during the divorce like a home, vehicles, bank accounts, retirement accounts, investments and other assets. However, dividing a business can be more complicated than dividing other types of assets.

How businesses are divided during divorce

First, the parties need to determine the value of the business. This usually involves using a business evaluator who will analyze the business to determine its fair market value. There are different methods to determine the value, but generally it involves discovering what a potential buyer would pay for the business. However, it can be even more complicated than that depending on the size and structure of the business.

Once the value is known, the couple will have to determine whether one spouse will continue running the company and buy out the other of their portion of the business. This can be easier if only one spouse did not have anything to do with the company, but this can become more complicated when it was a family business run by both spouses who relied on the business for all of their income.

Another consideration of splitting a business in a divorce is that as the business generates the owner’s income, there could be some double dipping involved in the division if spousal support is also being paid by the owner of the business. This issue will need to be resolved during the divorce.

Dividing a business during a divorce in California can be a complicated process. It can also be stressful as people are trying to continue to run the business while going through the divorce. It is important to understand the value, but also to determine how any buyout will be completed. Experienced attorneys understand the various options for dividing businesses in divorce and consulting with one could be beneficial.