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What Happens to the Company When Divorcing Spouses Co-Own a California Business?



April 29, 2023, In Divorce

Divorcing Spouses Co-Own a Business

At WHITMARSH FAMILY LAW, PC, our Los Angeles family law attorney knows it is not uncommon for spouses to share California businesses while they are married.

Typically, the only time the company’s ownership is in question is when they pursue a divorce.

Then, the question becomes, who gets all or part of its interests? The answer is, it depends.

Here is why.

Did You Agree to Sign a Prenuptial or Postnuptial Agreement?

Both prenuptial agreements — which are created and signed before the marriage — and postnuptial agreements, created and signed after the couple says, “I do,” are binding contracts that effectively protect the business in the event of a divorce, whether spouses are business owners together or separately.

If there is no pre- or postnuptial agreement in place, any property that was acquired or grown during the marriage — including businesses — is generally considered marital property.

California is a community property state. This means that property, including businesses, acquired during the marriage by either spouse is generally presumed to be owned by each spouse equally.

The best way to determine what the business is worth, and how it should be divided, is to obtain a valuation for the business.

How is a California Business Evaluated for Property Division Purposes?

Businesses can be evaluated by subtracting the value of the company’s liabilities from all tangible and intangible assets, which should involve help from both an accountant and an attorney.

If both spouses agree to the final evaluation, they can decide on their own how to split the business.

If they do not agree, the court usually divides the business in one of these three ways:

  • The spouses continue operating the business together after the divorce.
  • One spouse keeps ownership of the business and buys out the other spouse through scheduled payments or a lump sum of cash, or with other assets like the family home or retirement accounts.
  • The spouses sell the business and split the proceeds.

Certainly, these solutions are easier listed than agreed upon, which is why it is important to discuss all your legal options with a skilled Los Angeles divorce attorney as soon as possible. We can help you understand your legal rights and options, so you can make informed decisions about your future.

Are You Business Owners Who Are Seeking a Divorce in California? We Can Help.

If you have questions about how your divorce will impact your business ownership and interests, contact our skilled family law attorneys in Los Angeles County at WHITMARSH FAMILY LAW, PC by calling (310) 552-3505 to schedule a free consultation today. We can help provide solutions that produce results.

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If you are considering a Divorce in Los Angeles, CA, Contact our experienced Attorney Today and Get a Free Consultation.

Give us a call 310-552-3505