Entrepreneur Divorce in California: Safeguarding Your Company and Finances

As an entrepreneur, you are fully invested in your financial endeavors, which is great for your bottom line – but entrepreneurship can add an additional layer of complications in a divorce. California is a community property state, which makes safeguarding your complex financial investments and business enterprises more challenging. Fortunately, having the professional legal representation of an experienced Orange County property division attorney in your corner can make a significant difference in your ability to protect your company and your finances.

A Community Property State

The fact that California is a community property state means that all the assets you and your spouse amassed during your marriage belong to both of you equally. If you divorce, these assets must be divided between you evenly, and few factors complicate the matter the way business ownership can.

Community vs. Separate Property

Anything that either of you owned prior to marriage is considered separate property, but to retain the separate nature of these assets, the original owner must keep them strictly separate from marital assets. Any commingling of the two can transform separate property into community property. In addition, the amount of a separate asset that increases in value during your marriage will be treated as community property.

The Nature of Your Company

In the event that you started your business after your marriage, it is near-certain that your spouse has a property interest in it. Even if you started it completely on your own, your business interest will be community property.

If you owned your company prior to marriage, there is still a very good chance that your spouse has some ownership rights. Common scenarios that can give a spouse an ownership interest in a business their other spouse had before the marriage include:

• If you used marital funds to grow the business
• If the business increased in value during your marriage
• If your spouse helped you run the business

Know the Value of Your Assets

A key component of protecting your assets in divorce is knowing their value. This generally begins with compiling each of the following:

• A comprehensive list of your total assets and the nature of each in terms of being either separate property, community property, or a combination of the two
• Professional valuations of those assets that do not come with ready prices attached, such as the company you own
• An assessment of your business in relation to its annual earnings, potential for growth, market position, and any professional goodwill that applies

Having values in hand that you can defend with solid evidence puts you in a much better position to safeguard your full range of assets in a California divorce. It’s crucial to begin this process as early as possible, ideally before divorce proceedings begin, as gathering and analyzing this information takes considerable time. Working with experienced professionals, such as forensic accountants and business valuators, can help ensure accuracy and credibility in your asset valuations. Remember that attempting to hide or undervalue assets can result in severe legal consequences and damage your credibility with the court.

If You Have a Prenuptial Agreement in Place

A binding prenuptial agreement can afford a level of protection that is difficult to otherwise achieve.  There are, however, strict rules that must be adhered to for a prenuptial agreement to be valid, including:

• The agreement must be in writing – verbal prenups are not enforceable in the State of California.
• The agreement must be signed at least seven days after its creation and must be notarized.
• The parties must disclose their complete finances, including both assets and debts, to one another.
• The terms included cannot be unconscionable, which means they can’t be overtly unfair to either spouse.

If you have a prenuptial agreement in place, it can go a long way in your quest to protect your financial rights, and if you do not, there are other important steps you can take to help ensure that property division in your divorce is fair.

Negotiating a Fair Settlement

No two businesses are alike, and neither are any two divorces, which means the intersection of the two is similarly unique and requires legal finesse to strike a balance that protects both parties’ rights and best interests. Achieving this requires an assessment of you and your divorcing spouse’s contributions to the marital estate as well as each of your needs moving forward, which must be considered in the context of supporting the foundation of the company you have created, which is a tall order.

Options toward this end include offsetting your spouse’s ownership in the business enterprise with other marital assets or structuring a payment system that is designed to buy out your spouse’s share without undermining business operations. If your spouse ran the business with you or has close working knowledge of proprietary information, you may also want to consider negotiating a noncompete agreement. Doing so helps to ensure that your ex will not start a similar business in the same geographic area and will not share critical information about the business with your competitors.

Maintaining Confidence in Your Entrepreneurial Pursuits

Yes, going through a divorce is a difficult transition that can leave you feeling off balance, but it doesn’t have to hurt your entrepreneurial ambitions. Putting thoughtful effort into property division in your case and working closely with a dedicated divorce attorney can help pave the way toward continued success. And you could walk away with the confidence that comes from knowing you did what it takes to protect your financial rights in the midst of a challenging divorce, which speaks to your entrepreneurial spirit.

Call an Orange County Divorce Lawyer Today

Few things complicate the division of property in a California divorce the way high assets and business ownership can. Fortunately, the resourceful Orange County property division attorneys at Minyard Morris dedicate their imposing practice to fiercely protecting the financial rights of entrepreneurs like you throughout the divorce process. Our well-respected legal team is firmly on your side, here to help, and committed to resolving your case favorably.

To schedule a free case evaluation, contact us online or call 949-724-1111.