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What Happens to Your Business in a Divorce?

What Happens to Your Business in a Divorce?

If you are a business owner who is contemplating divorce, you likely have a number of concerns about what will happen to the company going forward. While every situation is different, there are some general principles that can be applied across the board. 

Is the Business Community Property?

If the business was started during the course of the marriage, it may be considered community property, even if only one partner was actually involved in the business.  Certainly, if both partners run the company together, each will have a claim to a portion of it.  However, if the company was inherited, or the funds to start it were inherited or gifted to just one spouse, it may be possible to claim it as separate property. Likewise, if the business belonged to one partner prior to the marriage, it may be considered separate property, with a few caveats. The court will consider the value of the business at the time a couple married, as well as any contributions to the business that a partner made over the course of the marriage. Did the contributing partner put in time or money that added to the value of the company? If so, there would be an obvious claim for a portion of the final assessment. 

Valuing the Company

Unless both spouses agree that the business goes to the operating partner in full, it is going to be necessary to get the bottom line value of the business. That way all parties involved will have an accurate sense of the financial situation going forward. Forensic accountants who are familiar with this sort of thing must analyze a number of factors in order to determine the value of a company when a couple divorces. Those factors include the balance sheet, of course, along with some other issues that may surprise individuals unfamiliar with the process. Issues to be considered include:

  • Location;
  • Volume of business;
  • Branding impacts;
  • The length of time that the business has served the community;
  • The reputation of the business, and of the owner in particular.

Who Hires the Forensic Accountant?

Either partner may hire a forensic accountant, or the couple may agree to hire one together. In some cases, the court will appoint one at the request of one or both individuals involved. It is important to note that two different accountants may come to very different conclusions about the net value of a business. That could mean some critical negotiations take place if couples cannot agree on final numbers.

You Need an Advocate

Getting divorced is difficult enough without having to stress over the implications for your livelihood. Whatever your situation, having a strong legal advocate who knows the ropes and is looking out for your best interests is the surest way to achieve positive results for you. At Beck Law P.C.,  we will always endeavor to ensure the best outcomes for our clients. If you live in Sonoma County, Mendocino County or Lake County California, contact our Santa Rosa office today to discuss your situation.

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