Dividing interests in a business is complex emotionally as well as financially. Business owners often put in as much time, effort, and worry into building an enterprise as they would into raising a child. When dividing business assets, it is important to take the right steps to protect the value of the business and keep it running profitably.

The experienced team at Holstrom, Block & Parke, APLC has decades of experience safeguarding business interests in divorce, preserving profitability while ensuring that clients receive the right share of assets. Business division combines the financial complexity of intricate property allocation issues with the emotional trauma of a custody battle. We manage the challenges to develop solutions that enable both spouses to move forward with confidence.

Many business owners are terrified about what will happen to their business because of a divorce. They have heard that California is a community property state so that marital property is divided equally between spouses. They don’t want to operate the business jointly with a former spouse, and yet they cannot see how the business can survive if the assets are divided in half.

Before panicking, it is important to understand some basics. First, California is indeed a community property state, but only jointly owned marital property is divided equally in divorce. Property that is considered to belong solely to one spouse is separate property, and that spouse keeps it in divorce. So the first question to consider is whether the business is community property, separate property, or a mixture of both.

If you have a pre- or postnuptial agreement specifying that businesses are to be kept as a spouse’s separate property, the terms you established in your agreement will override California law, and the business will be separate. Assuming you don’t have a prior agreement on the subject, then at least a portion of the business will probably be community property, even if only one spouse worked on it.

But some of the value of the business could still be separate property of one spouse, so be certain that your divorce attorney is prepared with the right arguments to support your position as to how much of the business needs to be divided as community property. For instance, if your attorney can show that the business is a family business passed down to you as an inheritance or gift and you did not invest any marital assets into it, your attorney could succeed in allowing you to keep more of the value as your separate property.

Under the law, a business is just another asset to be allocated in divorce. That asset will be assigned a value, and that value will be used in determining the appropriate division of community property.

As a practical matter, however, your divorce attorney needs to be aware of the numerous factors that go into establishing a proper value for the business. The value could be based on cash flow, expectations, assets on hand, or combination of factors. You may need to include the value of intangible assets.

Moreover, as noted above, you also need to take steps to ensure the business continues to operate without losing value during the divorce process. You also need a plan to transition after the divorce. One spouse might buy out the other’s interests, one spouse might receive partial ownership, the business could be split into two entities, or the business could be sold.

Business asset division is one of those complex tasks where experience makes a tremendous difference in the process and the outcome of a divorce. With over 300 years of combined experience, you can trust the team at Holstrom, Block & Park to develop the plans necessary to preserve the value of your business during divorce and to secure the right allocation of assets for your future.

Schedule a confidential strategy session to learn more about the protections we can provide for you and your business.