If you and your spouse are separating, you will likely have certain assets that you want to hold onto in the divorce. If you have started your own business, maintaining ownership of that business may be especially important to you. Property division in California divorces can be complicated, particularly when it comes to high-value items.
Is your business marital property?
In community property states like California, marital property will be divided equally between your soon-to-be ex and you in the divorce. Your business may be considered marital property if:
- You started or acquired the business during your marriage.
- You started or inherited the business before your marriage, but contributed to it with marital funds, making it commingled property.
- You started the business before your marriage, but your husband or wife became the business manager.
Valuation of your business
If your business is determined to be marital property, you will then need to value your business. The value of your business will likely depend on many factors, including the business’s:
- Fixed assets (e.g., furniture or equipment)
- Intangible assets (e.g., accounts receivable)
- Goodwill
- Debts/liabilities
- Current and future profitability
Deciding what happens to your business
Once the business has been valued, the best scenario is that you and your spouse agree on what to do next. You may choose to sell the business and divide the proceeds equally between you or one of you may choose to buy the other out.
If you cannot agree, the courts will step in to decide what happens next. After considering the length of the marriage and how involved each spouse was in the business, the court will make a final decision.