Divorcing as a business owner in California can bring an entirely unique set of complications.
California community property law requires that marital property be equally divided in a divorce. But if you own a business, you may worry that dividing the business with your spouse could mean the end of the business.
This is especially true if your spouse knows little about running the business but now wants some say in it because of the divorce. It is not unheard of for a spouse to demand some piece of the business simply to get back at the other spouse for the divorce.
Pre- and post-nuptial agreements
The best way to protect a business in a divorce is addressing the issue before a divorce is filed through a pre-nuptial or post-nuptial agreement. These agreements can state which assets and liabilities are separate property, which is not subject to division in a divorce, and how marital property is divided.
However, many times business owners find themselves going through a divorce without the benefit of one of these agreements. However, there are still some options that can protect your business and ensure its success post-divorce.
Buy out
A common solution involves one spouse buying out the other’s share of the business. If your goal is to keep the business, you will typically need to buy out your spouse’s half of the community property value.
You may consider drafting additional documents to protect your business’s intellectual property in this situation. Your spouse may know trade secrets or other information you want to remain confidential. A non-disclosure agreement is an example of a document that can prevent your spouse from disclosing any of these secrets.
If your spouse truly wants to continue to maintain a role in the business, you can choose to run the business together as divorced spouse. You should generally not choose this option unless you are sure you and your spouse can run a business together amicably and professionally, putting any personal feelings aside.
