Divorce does not mean the end of your small business

Sharman L. Brooks

Some California couples who decide to proceed with a divorce might have to negotiate what happens to their small business during the division of property. There are different options about how business owners can approach this, each depending on a variety of factors and considerations.

Who was responsible for the business before the divorce?

One of the first things to consider is who ran the business before the couple decided to end the marriage. If only one spouse was involved, then the likelihood is that that same spouse will continue to run it. However, if both spouses were involved, additional factors should be considered. If the spouses can get along and continue running it together, they need to specify each person’s legal responsibility and their duties related to the business. If the spouses cannot run the business together, the factors to consider include:

  • Laying out a clear system to report the finances of the business to the other spouse
  • Considering if one spouse can do both spouses’ jobs
  • Bringing in another person as a manager or partner to take over the other spouse’s responsibilities

The value of the business versus the cost of keeping it

Another big consideration when deciding whether to keep running the business together, buy out your spouse in the business or letting your spouse buy you out is the value of the business. Getting an accurate valuation of the business before filing for divorce will help both spouses make an informed decision. Fighting in court for the business, for example, might end up costing as much, if not more, than what the business is worth. In those cases, the fight might not be financially worth it.

Divorce is a complicated process and when a business is involved, it becomes even more complex. Consulting in advance with a family law attorney about the options that are available might be beneficial.

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