Dividing a Business in Your Divorce in San Diego County

Divorce

Dividing assets as part of a divorce can affect the divorcing couple in many ways, especially if the asset is a business that forms a large part of the couple’s income. Both spouses may want to keep the business, but not necessarily continue co-owning it with each other. Whether a business is divided as part of a San Diego County divorce depends on how it is characterized.

Is the Business Community or Separate Property?

In California, assets that a couple acquires during a marriage are generally classified as community property, unless they fit an exception. Assets are considered separate property of a spouse when they were acquired before the marriage, or during the marriage through an inheritance. Community property is generally divided equally between the divorcing couple, while separate property is kept by the spouse who owned it or inherited it.

A business can be characterized as either community or separate property depending on how it was acquired. If one spouse inherited the family business from his parents, then this business is not likely to be divided as community property. A court can sometimes decide that a business has been changed from separate property to community property by the actions of the couple during the marriage, like mixing separate and community property funds.

If the business was started or purchased within the marriage by the couple, they each have a stake in it. Even if only one spouse is part of another business with third party partners, the other spouse may be entitled to a share of that business if the spouse’s share in the business is considered community property.

Valuing a Business for Division During a San Diego County Divorce

Businesses do not always have to be sold as part of a divorce. If one spouse can show that she has a primary role in running the business—or that the business depends on her professional connections and certifications that the other spouse does not have—a court can award that spouse the business. However, the spouse who is allowed to continue operating a business that is considered community property has to pay out the other spouse.

In order to be divided or for one spouse to pay out the other, a business has to be valued by specific experts, business valuation or forensic accountants, who can take the business assets into consideration, as well as future earnings, and even the goodwill the business has built up and determine the marital value of the business. Once the marital value of the business is determined, the spouse who is keeping the business can compensate the other spouse for his or her share.

Keeping the Business Jointly Owned

In some cases, if the spouses want to keep working together despite their divorce, they may be able to do so if they can reach an agreement. They would have to reach a new business agreement and be clear on each person’s new role and ownership in the business. It would also be wise to have an attorney draft provisions into the agreement specifically on how the business is to be treated in the future if, for example, one of the spouses gets married.

Contact an Attorney Experienced When Getting Divorced in San Diego County

Dividing a business during a divorce can be a difficult part of the divorce because so much is often at stake, especially if the business is profitable and has been the main source of income for the couple.

If you are going through a divorce, you need an experienced San Diego County divorce attorney who will look out for your interests, address all the issues that arise when dealing with a business during a divorce, and fight for you to get what you deserve. Contact an experienced San Diego divorce attorney from San Diego’s JWB Family Law today.

Getting divorced in San Diego County? Call us today. 619.234.6123

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