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Property division and the family business

The U.S. Census Bureau reports that around 3.7 million businesses in the nation are owned by a married couple. Couples in California may put a lot of effort into seeing their family business grow and thrive, but sometimes the same can’t be said for their marriage. When that happens, they may decide that they are best off getting a divorce. However, how will a divorce affect the business they own together?

One option that might be available in some situations is to have the business valued, and then one spouse can buy the other spouse out. For example, during the property division process, one spouse’s share of the business for can be exchanged for marital property of equal value, or if the spouse retaining the business has the financial resources to do so, they can pay for their ex’s share in the business in cash or in installments if appropriate. This may work well if the couple knows they cannot maintain a professional relationship with one another, or if one spouse simply has no interest in remaining a part of the family business once their marriage is over while the other spouse wishes to keep running the business.

Of course, married couples can be proactive from the get-go, and enter into a prenuptial agreement prior to walking down the aisle that addresses what will be done with the family business if they divorce. It is important that the agreement allows both parties to support themselves financially should their marriage not last, and that it allows them both to save for retirement. And, should the formation of the family business take place during the course of the marriage, and no prenup is in place, it may be possible to execute a postnuptial agreement that addresses these issues.

In the end, the decision of what to do with the family business in the event of a divorce can have significant financial consequences. Each party will want to ensure that they are treated fairly during the property division process. They may have several options to consider with regards to their jointly-owned business, so it can help to have professional guidance on the matter.

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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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