Is your small business at risk when you file for divorce?

On Behalf of | Apr 7, 2022 | Divorce |

Your plans for life have probably changed a lot since you first got married. You may have never expected to go back to college and pursue an advanced degree or to inherit the company from a family member. However, you are now the owner of a successful small business. 

You may never have planned for divorce, either. If your marriage has recently been in a bad place, you may feel worried about a possible future divorce and what that might mean for your small business. Will you have to share the company you own with your spouse if you divorce? 

Community property rules apply to most of your assets

If the business is something you started or acquired during the marriage, then your spouse does potentially have a partial interest in the business under California community property laws. 

However, if you used your separate property, like money saved before the marriage, to start the business, you could claim part of its value as your separate property in the divorce. You could also potentially protect it as separate property if you inherited the business. 

Could your ex take the business?

Sitcoms love to use plots where someone inexperienced receives a business in a divorce, but that is a very unlikely scenario. Judges dividing marital assets will want to split them evenly in accordance with community property laws. 

You can minimize how much of the business’s value is at risk by obtaining a thorough business valuation that looks at all of the costs and liabilities to operate it, not just the value of an asset or its revenue. You may be able to offer your spouse something else of value rather than an ownership interest in the business once you have established a fair market value for the company. 

Reviewing your financial records is a good starting place if you want to protect a particular asset in the property division proceedings of a California divorce.