A divorce can have a negative impact on many aspects of a person’s life, including, of course, family relationships, finances, means of earing an income and loss of assets paid to the other spouse. One of the problems that can arise during a California divorce is the effect of the divorce on ownership of a small business. Because all marital property must be divided equally, the ownership interest in a small business is also subject to the requirement of equal division. Without going into detail about how a divorce may affect the owner of a small business, anyone who owns all or a significant portion of such an enterprise should carefully consider how a divorce may adversely affect the business.
One of the best legal protections is a prenuptial agreement that gives one spouse the entirety of the small business regardless of how other assets are divided. However, an enforceable prenuptial agreement must be signed by both parties before the wedding takes places. Waiting until a divorce rears its ugly is usually too long.
Another issue is preventing the other spouse from disrupting the management of the business. A prenuptial agreement can prevent such a result, but as noted, a legally effective prenup must be signed before the marriage.
A negotiated settlement to all property division issues may offer a way out, but such settlements require the agreements of both parties.
More drastic protections
Among the most drastic solutions is the sale of the business. While the owner is giving up control and future income, the sale has the effect of converting the business to cash, an asset that is readily divided. Selling other assets of lesser value may have the same effect. Selling the business over time may also allow the owner to keep the majority share.
As this summary implies, protecting a person’s ownership of a business through the twists and turns of a contested divorce can be a complex undertaking. Any business owner who is heading for a divorce may wish to consult an experienced divorce lawyer for advice on the best methods of protecting the business from the division of assets required in a California divorce.