Valuable marital property is often a primary source of conflict during California divorce proceedings. Spouses frequently fight over retirement accounts, real estate holdings and investments. Higher-value marital property can trigger emotional disputes and can make it much harder for spouses to settle key marital matters.
A family business could in part contribute to a divorce by demanding too much time from one spouse or creating a hostile dynamic between the spouses. It can also very easily make the divorce process more complicated. As such, there are several practical issues that people typically need to address when the marital estate includes a family business.
What should happen to the company?
Divorce can mean major changes to someone’s life and major challenges that might make continued business ownership prohibitively difficult. Some people agree that the best option when divorcing is to sell off the family business so that the spouses can share in the proceeds from that sale while rebuilding their lives. Other times, spouses might agree to have one person continue running the company instead of closing down or liquidating the business. Spouses may disagree about what solution is best given their circumstances.
Future employment arrangements
When a family business is successful, both adults may work at the company. A divorce might mean that continuing to work together is an unrealistic expectation. Spouses may need to negotiate arrangements in which one of them transitions away from the company by seeking outside employment. If both spouses intend to continue working at the company, thorough contractual agreements may be necessary to reduce the risk of such arrangements.
The value of the business
Business valuation can require numerous different steps depending on the type of company and other factors. Spouses may disagree intensely about what the company is actually worth. Setting a realistic business value is crucial for the property division process. The company’s worth could affect many other important terms during divorce proceedings, including what happens with retirement savings or real property.
Business owners often need to set clear priorities if they hope to protect the organizations that they have developed during their marriages. Preparing for likely challenges during complex property division negotiations may benefit those who have invested in a family business and whose marriages are at an end.
