In California, a divorce where one or both of the partners also owns a business can be one of the most expensive and complex forms of divorce. Dividing the marital assets becomes much harder when company ownership is involved. This is a difficult and unpredictable situation that can affect the viability of the business going forward.
Businesses in divorce
The major challenge of a business being involved in a divorce is the fact that one partner, the one less connected to the business, will usually want to cut ties with the business. However, if they have ownership, then they need to be compensated and bought out of the business. That can be extremely expensive, and the other partner may not be able to afford that much of a cash payment without selling the business outright. If they can afford it, it might involve draining cash accounts and other financial assets like retirement accounts to make it possible. This can be a huge financial burden for a business owner.
The only way to protect against this is with a prenup, and many people don’t expect to divorce, so they don’t write and sign prenups. It is much harder to protect assets without a prenup in place, and the more assets are involved, the more complex the asset division negotiations and settlement will be. Not only does this make it harder to get a good settlement, but additional lawyer hours will increase the cost of the divorce process.
If business owners are not careful, they might wind up with an expensive and tricky divorce that can break up the company. For this reason, it’s important to put as many protective measures in place as possible before a marriage relationship ends.