The family business is often the result of years of hard work, dedication and sacrifice. When a marriage ends, it can create tension, conflict and uncertainty.
Who will retain control of the family business? Will it become a casualty of the divorce? Understanding the potential outcomes can help you prepare for the process if you are confronting this situation.
The family business’ fate post-divorce depends on many factors
Several factors influence the fate of a family business during a divorce:
- The valuation of the business
- The contribution of each spouse to the business
- The desire of either spouse to continue running the business
- The financial resources available for buyouts or divisions
The law typically considers a family business as community property if the couple started or acquired it during the marriage. Both spouses have a claim to its value, regardless of who actively managed the business.
The goal is to divide the business’s value between spouses equitably. The court may sometimes order the spouses to sell the business and mandate a 50/50 split of the proceeds. The court may also award the business to one spouse, with the other spouse receiving a buyout or compensation.
Each scenario has unique financial and legal implications. You will need to consider tax consequences, potential debts and the impact on the business’s future operations.
Every family needs unique legal solutions
What works for other families may not work for your specific situation, especially if you have considerable assets to factor in. To address financial challenges post-divorce, speak with a California attorney well-versed in divorce and family law.