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Family businesses at stake in California divorces

When married California couples split up, there are a myriad of issues at stake. A divorce can necessitate resolving child custody, child support and many aspects of property division. One kind of property division is the matter of what is done with a family business.

A woman who owned a prospering public relations business at the time of her divorce found out, to her dismay, that it was considered community property. Because of that, the husband she was divorcing was legally entitled to a stake in it. The woman had to write a check in the staggering amount of $800,000 and give it to her ex-husband in order to buy him out of his share.

Needless to say, she wasn't happy about it. She even explored the possibility of shutting the business down, but the court wouldn't let her. This kind of complication arises often when a family business is a part of divorce proceedings. One marital partner may have built it by themselves, but the law may say that the other marital partner gets half of its value anyway.

This will be an ongoing issue in California divorces and nationwide. U.S. Census Bureau data affirms that 3.7 million businesses are owned by husband and wife pairs, making those businesses potentially subject to division or buyouts. If there is a buyout, the husband and wife may disagree on how much the business is worth.

Naturally, the one who gets the money wants it considered to be worth more and the one who pays the money wants it considered to be worth less. Understanding these issues is a good basis for protecting oneself from potential legal repercussions of operating a family business while married.

Source: CBS News, "Who holds onto the family business when couples divorce?" http://www.mainstreet.com/article/who-holds-onto-the-family-business-when-couples-divorce, Feb. 10, 2015

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