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What happens to a business in a divorce

On Behalf of The Law Offices of Ronda A. Middleton

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Mar 25, 2019
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When a business owner gets a divorce, the asset division process can get complicated. However, there are several ways a California company could be addressed in a divorce.

The most popular option for one spouse to keep the business. This usually involves one spouse buying out the other. If the buyout is done as a direct purchase of shares because of divorce, it will usually not be taxable. However, a spouse who does not have the liquidity to purchase the business may need to use a settlement note. In some cases, there may be a company that both exes have shares in. An easy option would be for the company to buy the shares of one spouse. Since this can trigger a significant capital gains tax, it is important to structure it with that in mind.

Some spouses may agree to keep running the business together even after the divorce is final. While certain couples can make this work, it can be a challenge. Another option is to sell the business altogether. This eliminates the challenge of the two having to continue working together, but it is not always straightforward. Selling can take time, and this can make the divorce process last longer as well. Furthermore, there might need to be interim negotiations about how much each spouse will be involved in the company until the sale happens.

There are other complexities involved in dividing a business in a divorce. The process of valuation can be time-consuming and stressful. A spouse may own a business with partners, and this means the divorce could affect them as well. Property division can also be complicated in the case of a home or a retirement account. Like a business, a home is not always easy to sell immediately. However, a family law attorney could help a client through the process.

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We represent clients in Orange County and Southern California in all types of family law matters involving divorce, mediation, property division and issues involving children. Call our Fullerton office at 714-680-9777 or use our online contact form to schedule a free consultation. We ensure a 24-hour response to all inquiries.

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