Four considerations when divorcing a business owner

On Behalf of | Sep 14, 2022 | Divorce

If your marriage to a business owner has soured, you’re probably worried about what your financial stability is going to look like post-divorce. This is understandable, especially if you’ve relied on your spouse for financial stability. But you should take some comfort in knowing that there are legal strategies available to help you secure the stability that you need post-divorce. One option at your disposal involves seeking the half of the business to which you’re entitled.

Dealing with a business in a California divorce

Your first step in analyzing your spouse’s business is to determine which portions of it are considered community property. If the business was created after your marriage, you should be entitled to half of it. If it was created before you were married, the calculation may be a little different, depending on how much the business’s value has changed since you and your spouse were married.

But before you aggressively seek half of your spouse’s business, you might want to take the following into consideration:

  1. How is taking your share going to affect other aspects of your divorce? Post-divorce, your spouse is going to have to rely on the business to generate income. This income, in turn, may be necessary to pay alimony and child support. If you take half of the business from your spouse, the business may be left floundering. As a result, you might be left without the long-term support payments that you and your child need. So, be diligent in assessing whether fighting for your full portion of the business is in your best interests or if you’re better off seeking other benefits in exchange for giving up some of your share of the business.
  2. Is your spouse being honest with you? There’s often a lot of value wrapped up in a business, and as a result, your spouse may be trying to downplay its valuation to avoid paying you what you’re owed. Your spouse might try to inflate business debts while decreasing earnings reports, and business assets might be squirreled away out of your sight. You might want to work with a forensic accountant to ensure that you have a full picture of your spouse’s business and what you’re entitled to recover through the divorce process.
  3. Have you considered the tax implications? Taking on half of a business may throw you into a new tax bracket that could leave you struggling come tax season. So, before you fight for half of the business, you’ll want to make sure that you have a full understanding of the short- and long-term implications of your decision.
  4. What is your true intent? Your decision about whether to fight for your half of the business may depend in large part on what you intend to do with that half. Do you intend to merely sell it to a third party? Do you want to use it as a way to force your spouse to buy you out? Do you really want to have a voice in the business and the way it operates? These are all questions that you’ll need to answer before you can determine which course of action is best for you.

Approach your divorce with confidence

You certainly have a lot to consider as you try to navigate your divorce. And making the wrong decision on any issue can put you at a significant financial disadvantage post-divorce. That’s why if you’re worried about how your marriage dissolution is going to play out, you might want to think about having a strong legal advocate on your side to help you argue for what is best for you.

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