Divorce & Business Partnerships

Divorce and Business Partnerships in Los Angeles and Throughout California: Navigating Complex Legal Terrain

When marriage and business interests converge, the complexities of divorce can become significantly more intricate. In California—a state recognized for its progressive family law and thriving entrepreneurial climate—divorce involving business partnerships presents unique legal challenges. This article provides insight into managing business partnerships during a divorce in California.

Understanding California’s Community Property Laws

California is one of nine community property states in the U.S. This means that, in general, all assets and debts acquired during the marriage are classified as community property, subject to equal division upon divorce. However, when businesses are involved, the division process can become complicated.

If a business was founded or acquired during the marriage, it is generally treated as community property. Even if only one spouse actively participated in the business, both spouses may have a claim to its value. Conversely, if the business was established before the marriage, it may be considered separate property. However, any appreciation in its value during the marriage could still be subject to division.

Valuing a Business in Divorce Proceedings

A key challenge in divorces involving businesses is determining the business’s value. California courts typically rely on expert business valuators to assess the company’s worth. These professionals evaluate several factors, including:

·  Assets and liabilities

·  Cash flow and revenue projections

·  Market conditions and industry trends

·  Goodwill and reputation

·  Intellectual property and proprietary assets

Both parties are entitled to hire their own business valuation experts, and it is not uncommon for valuation discrepancies to arise. In such cases, the court may appoint a neutral expert to provide an impartial assessment.

Options for Handling Business Partnerships in Divorce

Couples facing the division of a business in a California divorce generally have several options:

1. Buyout: One spouse purchases the other’s share of the business, often through a cash payment or by offsetting the business value with other marital assets.

2. Co-ownership: Both spouses continue to jointly own and manage the business post-divorce, though this can present challenges. In some instances, maintaining co-ownership may be necessary to ensure the business’s viability.

3. Sell and divide: The business is sold, and the proceeds are divided between the spouses. While this may provide a clear resolution, it may not be ideal if the business serves as the primary income source for one or both parties.

4. Deferred buyout or sale: The spouses agree to continue running the business for a specified period, after which one spouse buys out the other, or the business is sold.

The Role of Mediation and Collaborative Divorce

Given the complexities of divorces involving business partnerships, many couples in California choose mediation or collaborative divorce as alternatives to traditional litigation. These methods offer distinct advantages:

·  Greater control over the outcome;

·  Potentially lower costs compared to court proceedings;

·  Increased privacy and confidentiality;

·  Flexibility to craft creative solutions tailored to both parties’ needs;

·  Reduced emotional stress and conflict.

In mediation, a neutral third party facilitates negotiations between the spouses. In collaborative divorce, each spouse has their own attorney, and all parties commit to working together to reach a resolution without going to court. These approaches can be especially advantageous when dealing with business-related issues.

Legal Representation in Business-Related Divorces

In a divorce involving a business partnership, it is critical to engage an attorney experienced in both family law and business matters. A skilled lawyer can assist you by:

·  Explaining your rights and obligations under California law;

·  Crafting a strategy to protect your business interests;

·  Managing the complexities of business valuation;

·  Negotiating fair settlements or representing you in court, if necessary;

·  Coordinating with other professionals, such as accountants and business valuation experts.

Each divorce is unique, and the best approach will depend on your specific circumstances. Whether you are a business owner facing divorce or a spouse with a stake in a family business, taking proactive steps to protect your rights and financial future is essential. Contact a Los Angeles divorce and business partnerships lawyer at Maknouni Family Law Firm, APC to discuss all your options.