Marriage and divorce are both common experiences in our culture. About 90 percent of people get married by the age of 50. Unfortunately, about 40 to 50 percent of married couples divorce in the United states. The divorce rate for subsequent marriages is even higher. One of the major issues to deal with during divorce is the division of businesses and professional practices.
Depending on what state you live in, you will need to divide property, including business, using either the community property system or principles of equitable distribution. California uses the community property system of dividing asset upon divorce.
What is the Community Property Standard?
Under California law, parties to a divorce are entitled to an equitable division of community property.
All property that you and your spouse acquire during your marriage qualifies as community property unless either of you can prove that the asset constitutes as your separate property. Separate property is any property that you or your spouse acquired before marriage or after separation. Separate property also refers to any property that either of you acquired in your own name during the marriage by gift, devise or bequest.
Dividing Businesses Ownership During Divorce
Under California’s general community property law, if you acquired a business during your marriage, it will be deemed a community business and both of you will have an interest upon divorce. However, if you acquired the business before you were married or after you got separated, it will be the sole and separate property of the party who acquired it.
However, unlike other assets, businesses change and their values do not remain static as a result. As such, if a business that was acquired before a marriage experienced growth during the marriage, that growth may be community property if it can be proven that it was the result of the use of community property funds or the non-owning spouse’s efforts.
Determining the Value of a Business
If your Central Valley divorce attorney determines that the business is community property, the next step is to accurately value the business. It is important to find a qualified business appraiser to conduct this valuation. In preparing a business valuation, the expert will examine the financial records of the business, including:
– Profit and loss statements over a certain period of time
– Assets, such as equipment, inventory and real property
– Cash flow
– Customer good will
External factors that need to be evaluated include the location of the business and economic conditions and trends that may affect future profitability.
Call an Experienced Central Valley Divorce Attorney
If you are going through a divorce or planning to file for divorce, it is important that you have a knowledgeable attorney fighting for your rights. For more information or to schedule a complimentary consultation with a Central Valley divorce attorney, please call Gurjit Srai (209) 323-5558 or (559) 449-1447, or complete our online form.