Protecting Your Business Assets during a High-Net-Worth Divorce

The division of marital property is generally a matter of considerable debate in California divorce cases, and if yours is a high-net-worth divorce, the issue is likely to be that much more challenging. Business ownership is a universally complicating factor when it comes to property division in divorce, and the intersection of high-net-worth divorce and business ownership ups the ante considerably. You’ve worked hard to amass the wealth that you have, and protecting your business assets throughout the divorce process is key. Fortunately, there are steps that you can take to help, and the most important of these is consulting with an experienced Orange County property division lawyer early in the process.

Yes, California Is a Community Property State

You’re probably all too aware that California is a community property state, which means that all the assets that you, your spouse, or you and your spouse together acquired during your marriage belong to both of you. Upon divorce, all your marital assets – or their values – must be divided between the two of you equally.

While this may seem like a pretty straightforward process, it doesn’t take matters like the need for nuanced valuations and information related to associated liabilities and tax implications into account.

Things can become even trickier if your business is a separate asset. This means that you owned the business prior to your marriage and kept it separate throughout, which can be a tall order in and of itself. Even if you can establish that your business is separate in nature, the amount that it has increased in value over the course of your marriage will almost certainly be classified as community property, and putting a value on this increased amount can be as challenging as putting a value on the business itself.

Suffice to say that, if you own a business and are facing a high-net-worth divorce, it’s complicated. Proceeding with caution and the skilled legal counsel of a trusted property division attorney is always advised.

Prenuptial Agreements

If you have a valid prenuptial agreement in place that addresses the matter of your business, it will guide how that aspect of property division will be resolved in your divorce. Prenuptial agreements are contracts between two married spouses, and included terms are enforceable by California courts as long as each of the following applies:

• The prenup is in writing, is signed by both spouses, and is notarized.
• Both spouses entered the agreement voluntarily.
• The terms included in the agreement are fair and reasonable.
• Each spouse afforded the other full disclosure regarding their assets and liabilities prior to entering the contract.
• Each spouse had seven days after receiving the final version of the contract to sign it.

If the Business Is a Marital Asset

If you started the business or otherwise came to own it while you were married, it’s very likely a marital asset. This doesn’t mean that you will need to sell your business and divide the proceeds between you and your spouse evenly upon divorce – which generally isn’t a financially savvy move. You will, however, need to attach a value that’s acceptable to both of you and to address the division of that value in your divorce.

The same is true if part of the business is marital, such as if it’s a separate property that has increased in value over the years or if you used marital funds to grow the business during your marriage. The part of the business that’s marital will need to be assessed for value, which will need to be divided between the two of you upon divorce.

Assigning a value to your business can be accomplished in several different ways, and the one you choose will depend upon your unique situation. The basics include the following:

• Calculating a mutually acceptable value between the two of you, which can save time, money, and divorce drama but can also be a tall order in the middle of a high-asset divorce.
• Agreeing between yourselves to hire one business valuator to assess the business’ value for the purposes of your divorce.
• Hiring your own separate valuators – if coming to an agreement on virtually any topic is out of the question.
• Addressing the matter of the business’ value at mediation – where you’ll have the opportunity to hammer out terms under the guidance of a professional mediator who will serve in the role of a neutral third party.

If you can’t reach a mutually acceptable value to assign to your business, another option is hiring a forensic accountant. They will carefully evaluate the business from every financial angle in order to create a detailed valuation that is very likely to hold up in court.

Protecting Your Business

If you own a business and are facing a high-net-worth divorce, you have options when it comes to buying out your spouse’s ownership, but protecting your overall financial rights in the process is another concern that you shouldn’t lose sight of. The basics include buying your spouse’s ownership in the business out with a lump sum, addressing their ownership in the business with other assets, or structuring payments to buy your spouse out over time.

The goal is striking a financial balance. And working closely with a savvy property division lawyer as well as professional financial advisors throughout the legal process is the surest path forward.

Consult with an Experienced Orange County Property Division Attorney Today

The formidable Orange County property division lawyers at Minyard Morris dedicate our impressive practice to protecting the financial rights of our clients throughout their complex high-asset cases. If you own a business as well, you’re facing additional challenges, and we’ll spare no effort in our focused protection of your financial and ownership rights. The outcome of your case is important, so please don’t delay reaching out and contacting or calling us at 949-724-1111 for more information about what we can do to help you today.