For California couples that have an interest in investment property, or a family business or other closely-held business, division of the business or property is a critical issue in a divorce. Along with the marital home, and pensions and retirement benefits, a business interest is typically one of the largest assets in a California divorce.
If a closely-held business was owned by one of the spouses before marriage, or was inherited, it may be considered at least partly separate property. This, in part, contributes to the difficulty with division of this asset. The parties and their attorneys (or a judge) must decide what portion of the business is community property; the value of both tangible and intangible assets of the business; and what the fate of the business will be in the divorce.
There are, essentially, three options. The first is to sell the business, and divide the proceeds of the marital portion of the business between the parties. The advantages of this option are that it provides an accurate value for the business (the business is worth what it sells for) and liquid assets (the proceeds of sale) to divide. The problem is that the business has likely been the livelihood and employment of one or both parties, and it is unlikely that a party will want to sacrifice his or her source of income.
The second option is for both parties to continue to own the business. This option has the advantage of avoiding the need for a complicated and expensive valuation of the business. The obvious disadvantage, of course, is that the divorced couple will remain indefinitely linked together by their shared interest in the business. If they cannot maintain a cordial relationship, the business may suffer. Additionally, this may not be a viable option due to the type of business. For example, a certified public accountant who has his or her own practice may not be able to utilize the services of an ex-spouse who is not an accountant and who cannot assist the business in some other capacity.
The third option is to obtain an appraisal of the value of the business, and for one party to purchase the other's interest by giving that party a greater share in other marital assets. This is, unsurprisingly, the most commonly chosen option, but it is not without potential pitfalls. It is critical to obtain a thorough and accurate valuation from an appraiser with experience valuing the type of business at issue. A truly accurate business valuation is often time-consuming and expensive. This is unavoidable, as the alternative is an inaccurate valuation that cheats one party out of his or her share of the value of the business. In short, the cost of an accurate business valuation may be significant, but that cost is dwarfed by the benefit the valuation provides.
At Shaffer & Associates, we work with several highly-qualified appraisers and business experts who can help us and our clients arrive at detailed, fair valuations of their investment property or family or closely-held businesses. Because of the value inherent in a business, parties often wage extended and bitter battles over their respective rights to this asset. These protracted legal fights are expensive in and of themselves, as well as costly in terms of potential damage to the business. We believe it is best for all concerned to work toward a negotiated settlement as to these assets whenever possible. However, in the event that our client's spouse is not willing to negotiate fairly or in good faith, we are fully prepared to litigate the issue in order to preserve our client's rights and interests.
The San Diego family law attorneys of Shaffer & Associates serve San Diego County and the surrounding communities, including Orange County, Riverside County and Los Angeles County. Contact Shaffer & Associates online or call (619) 595-3167 today to consult with us about the division of family-owned or closely-held businesses or investment property.