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The end of a marriage doesn’t have to be the end of a business

If you are the owner of a small business, you may have invested a great deal of time and effort into cultivating a successful enterprise. You probably consider your business to be of the utmost importance and wish to shield it from harm, but certain changes in life can be difficult to prepare for, some of which may pose a threat to the longevity of your company.

If you and your spouse decide to part ways, you may have concerns about how a divorce will affect your business. While the division of assets will inherently have an impact on your financial standings, it doesn’t necessarily spell doom for your company.

Addressing the options regarding a business during divorce

Chances are that you may wish to safeguard the future of your business during this period, but you might be uncertain how to achieve this goal. The options available to you will likely depend on the presence of certain variables, some of which may include the following:

  • Prenuptial agreement: If there is a prenuptial agreement in place, it may dictate the division of the assets listed within. However, this agreement must be properly formed and signed by each party voluntarily, or it might not be upheld during divorce proceedings.
  • Type of property: If you started the business prior to marriage, it may be classified as separate property, which will allow you to retain sole possession following divorce. However, if you mingle business assets with martial ones in any way, it may lose its separate identity.
  • Presence of salary: Paying yourself a competitive salary is also typically advisable, as failing to do so could leave your spouse claiming to have been denied the benefits thereof during marriage.
  • Partnership agreement: If you have business partners, there may be an agreement in place to protect the business interests of each party in the event of a life change such as divorce.

In community property states, such as California, the division of assets must be equal, which may leave you wondering if your spouse is entitled to half your business. However, this isn’t necessarily the case, as you may be able to relinquish possession of other assets in exchange for sole ownership of the company.

Seeking guidance

With numerous crucial aspects to consider during what will likely be a stressful and emotional period, you could be feeling somewhat overwhelmed by the process. However, you don’t have to go through it alone, and it may be in your best interests to seek guidance from someone with experience in such intricate matters. Obtaining guidance in the initial stages of the process could prove invaluable to pursuing the most favorable outcome possible concerning the future of your company.

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Joseph R. Zoucha, Attorney & Counselor at Law
520 Warren Street
Redwood City, CA 94063

Phone: 650-381-9591
Fax: 650-261-9650
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