As you know, marriage ends in divorce. California is a community property state where the division of assets in a divorce might affect your business.
If you want to protect your business, you need to plan strategically as per California’s law. Remember one thing, without planning, your ex might become your business partner, you might have to fight to keep your business, or your ex could even end up owning it.
This article will show you important steps to protect your business during divorce in California in 2024.
Let’s start with a better understanding!
What Is the Relation Between Your Business and California Divorce Law?
Before doing anything, you must understand the laws about divorce and property division in California. The professional divorce attorneys from Hills Law Group can guide you through these laws.
In California, assets gained during marriage are seen as community property and split equally. But, prenuptial and postnuptial agreements can protect your business from being seen as community property. These agreements decide how your business is treated in a divorce. However, hiring professional family law lawyers is a wise decision who know about business matters to create a solid agreement that follows California’s laws.
1. Prenups
A prenuptial agreement is a legal contract signed before marriage. If you had a business before getting married, a prenup can label it as separate property.
2. Postnups
A postnuptial agreement keeps your business safe even after you’re married. It’s like a prenup, but you sign it after you’re married. But, it works better if you agree on it a long time before your marriage ends. Sometimes, courts don’t think postnups are as good as prenups.
5 Tips to Protect Your Business During Divorce
1. Consider Spouse Each Contribution to Business
If your spouse helped a lot with your business, they might have a right to own part of it if you get divorced. The more your spouse did for the business, the stronger their case is in court. For this, you must know how much your spouse did for the business during your marriage. This thing will help you understand what might happen to the business in a divorce.
2. Organize Financial Records Effectively
During a divorce, the court will look at your business’s financial records. It’s very important to keep these papers accurate and organized. This way, the court can see the real value of your business and protect it from anyone trying to say it’s worth less than it is.
Besides, you also need to record each transaction such as income, assets, liabilities, etc. This will show the court how healthy your business is financially. If you don’t maintain records, the court might think you’re not being honest. This could make the judge trust your side of the story less.
3. Correct Property Valuation
If your marriage is at risk, it is important to determine the accurate value of your property. For this, you can hire a professional financial consultant who can help you in the whole process.
On the other hand, if the court picks someone to figure out the value, it’s even more important to have another person check their work before you agree to anything. You want to make sure the value they come up with is fair.
These experts will look at things like how much money your business makes, what other businesses are like, and how much people like your business to come up with a fair value.
Remember one important thing, getting the right value for your business will make sure everything is divided fairly.
4. Look at Buyout or Co-ownership Options
If you and your spouse own the business together, you can think about ways to deal with it, like a buyout or a co-ownership agreement.
● Buyout
In a buyout, one spouse can buy the other’s part of the business and become the only owner.
Both of you have to agree if you want to do a buyout.
● Co-ownership
With a co-ownership agreement, you write down how you’ll keep running the business together after the divorce and what each person’s job is. But, this is just a piece of paper. However, these options keep business continuing while solving conflicts.
5. Keep Your Business Entity Separate From Personal Finances
You must keep your personal and business finances separate. As you know, life is full of uncertainty and you might face family issues like divorce. The reason is that you can easily track money and understand how well your business is doing financially. Besides, it also creates a clear record of your money, which can be helpful if someone checks your finances or if there’s a legal problem.
But just separating money might not be enough if your spouse helped with the business. If they did, they might have a right to some of the business’s value. In that case, you might need to do other things, like make a prenup or postnup.
How to Keep Things Separate
There are following ways to keep your personal and business finances separate. Let’s have a look at them!
● Separate Bank Accounts
It is recommended to keep one account for personal finances and another for your business. Besides, you must make sure that business income is going into a business account. Plus, if you purchase anything for your business, you must make transactions from your business account. This way, you can keep things organized and separate.
● Different Credit Cards
You must use separate credit cards for business and personal finances. This way, it’s easier to see what you spend money on for your business, and it shows that your personal and business money is separate.
Get Help from Hills Law Group
Divorce can be tough, especially if you have a business. Having smart lawyers who know a lot about divorce can help make sure you’re okay during the divorce.
At Hills Law Group, we know a lot about family law and divorce. Our team of lawyers has helped lots of people with divorces, and we can help you too. We’ll give you good advice so you can make the right choices to keep your business safe during the divorce.
