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3 challenges for divorcing couples who own a business

On Behalf of | Sep 12, 2023 | Divorce

Any divorce will likely result in challenges for the spouses seeking to end their marriage. People frequently have a hard time agreeing on the most appropriate way to divide their property or even who should stay in the marital home after someone files the initial paperwork, for example.

The more successful people were during the marriage and the higher their standard of living, the more likely they are to have major property division challenges ahead as they seek to separate their lives during the divorce. For example, owning a business can absolutely enhance the standard of living for everyone in the family during a marriage, but that business will likely cause a number of challenges during the divorce process.

What happens to work arrangements?

It is very common for both spouses to work at the same small business. Even if one spouse is a chiropractor and is therefore the primary employee at the practice, the other might serve an administrative role. They may rely on the income and benefits provided by their position to support themselves. It may require some careful negotiations and transition planning to help one spouse leave the family business. If they intend to stay, there will usually need to be very clear rules and agreements in place to govern that arrangement.

What is the business worth?

One of the most difficult questions to answer about a thriving business is what the company’s value actually is. The business valuation process can be very complex and may look at everything from a company’s current market share to the long-term prospects for a specific industry in California. It can be very difficult for spouses to reach an agreement about what the business they own together is actually worth for the purposes of property division.

How will spouses share the company’s value?

One spouse may want to continue running the business, while the other might prefer to sell the company and split the proceeds with their spouse. It can be a challenge for people to agree on how they will share the company’s value, particularly when the business might be only partially marital property and would therefore be partially the separate property of one spouse with a greater interest in the organization.

Many of the major decisions concerning the business will end up in the hands of a judge if a couple litigates their divorce proceedings. Mediation and thorough negotiations are both means of reaching an agreement between spouses that will let them retain control over the outcome of their divorce. Ultimately, identifying the challenges that are likely to arise in a divorce involving a family-owned business may help people more effectively navigate the divorce process in California.

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