Family business and divorce in San Jose
How Does Divorce Affect a Family Business in San Jose
When you’re getting a California divorce and you have complex assets, these assets may include a family business. This is tricky, because you and your family and/or your spouse have built this business together. Going your separate ways as a couple could mean a major restructuring of the business. How do you divide your assets and also decide what the next move is for your business?
Do a Business Valuation
When you are dividing community property in a divorce, it’s critical that you understand what all the assets are worth. The benefit of using West Coast Divorce mediators in your California divorce is that the business appraisal we provide is neutral, saving the hassle and cost of hiring separate professionals to do a valuation. Separate appraisers could also offer different estimates that could derail your negotiations with your divorcing spouse. At Santa Clara Divorce Mediation, our divorce mediators have financial expertise and can do in-house valuations of any asset, from your fine art collection to your business.
Find Out What Percentage of the Asset You Are Entitled To
For many divorcing couples who didn’t start a business together, your spouse wasn’t always your business partner. The business might be inherited, or your spouse might have set up the business before the marriage. If so, unless you and your spouse have agreed otherwise, the period before you had a stake in the business should help to determine the percentage of the asset you are entitled to.
Assets that existed before the marriage or inherited property are considered to be separate from the community property. It becomes more complicated when marital funds are used to fund the business, or when you pay tax on the business, or business profits are used within the marriage. It’s particularly complex with a small privately held business, which for tax purposes is often called a “pass-through entity,” when you pay business taxes on your personal income. A skilled divorce mediator with financial expertise can help you understand how to value your portion of the business.
Decide How to Structure the Business Transfer or Buyout
After you understand who is entitled to what portion of the value of your family business, you have to decide how to distribute one spouse’s business stake in the property division. Especially if there are other business partners involved, these decisions could take the lead from the original operating agreements.
When you have a family business and you are getting divorced, you have a responsibility to the business and your spouse. This can make things complicated. If one of you wants to hold on to your stake in the business, you will have to buy the other spouse out. In divorce property division, this means giving your spouse assets and/or the cash equivalent to the value of their stake in the business. Understanding what assets represent the value of a business interest to your spouse could be a complex process. If you have business partners who aren’t in favor of a buyout, your spouse might have to sell their business interest, bringing new tax consequences into the equation.
Different business structures (such as non-profits, limited partnerships, etc.) have different tax consequences and offsets, so your divorce mediator needs to consider the nature of the business. If you decide to stay in business with your spouse you will probably need an agreement about how you interact and whether you want to review this arrangement in the future. These agreements can also be made in divorce mediation.
Deal with Debts and Liabilities
Every business will have debts and liabilities. Whether you are selling your business outright, selling your stake, buying out your spouse or staying in business with your spouse, you will have to consider your debts and liabilities in divorce. Debts and liabilities are part of your business balance sheet. In your community property division they will have to become part of your divorce balance sheet. What percentage of the debt you owe can be a complex calculation. You will need to work with divorce professionals who have financial expertise to help you make the correct calculation in relation to your community property
Our Divorce Mediation Services
We are West Coast divorce mediators who work with divorcing spouses who may have complex assets, foreign assets, inherited assets or a privately held business. Our financial and legal expertise can help you to bypass the usual headaches of divorce, such as hiring attorneys, hiring a separate appraiser to value your assets and engaging in an adversarial process.
We strive to make the divorce process as streamlined as possible, with a package of services, including document service and even assisting you with transitioning to your new life after divorce. If you are deciding what to do about a family business or any complex asset where there could be multiple interested parties and the need for careful valuation, we can provide valuations at a lower cost after conducting a thorough analysis.
We have offices in Santa Clara, San Diego and Silicon Valley and can mediate remotely or in person depending on your location and convenience. All our mediations are completely confidential and conducted by secure private server. Please contact us to learn more about our divorce mediation services.
