Understanding California’s complex divorce laws is already challenging enough, but dealing with business ownership and high-net-worth divorce in Los Angeles can make your situation especially difficult. If you’re going through a divorce in California and share a business or partnership with your spouse, it’s imperative that you work with a high asset divorce lawyer in Los Angeles who can help you understand your rights and how to protect your interests throughout the process.
Dividing Business Ownership in High-Net-Worth Divorces in Los Angeles
In Los Angeles, high-net-worth divorces involving businesses must still adhere to California’s community property laws. This means that any businesses that were created, bought, or invested in while a couple was married may qualify as communal property. Because California’s laws require all communal property to be separated when a married couple divorces, your business or investments are also subject to division.
However, because it is not possible to physically split a business in half, there are complex legal proceedings and tools that must be used to divide business ownership and interests fairly. These include valuing goodwill, separating community from separate property, addressing any prenuptial agreements that discuss the business, and valuing the overall worth of the business.
Key Aspects of Business Division in a High-Net-Worth Divorce
According to the CDC, over 670,000 divorces were reported nationally in 2023 alone. Many of these divorces involved complex assets such as businesses and high-net-worths. If you are going through a divorce involving business ownership matters, it’s important to consult a Los Angeles asset division lawyer who can help you understand your rights and the key aspects of business division in California. Important aspects of business division in a high-net-worth divorce include:
- Community Property Presumptions: Assets acquired or created during the marriage are generally divided equally, including businesses, even if only one spouse operated it.
- Valuation: Your business and its total worth must be calculated to ensure it is divided fairly. Financial professionals often use income, market, or asset-based approaches to determine the overall market value of the business.
- Goodwill: Courts differentiate personal goodwill, which is tied to the owner’s reputation, and enterprise goodwill, which is tied to the business entity, with the latter often subject to division.
- Each Spouse’s Relationship to the Business: When one spouse dedicates their life to creating a business, it’s important that this is seen by the courts. While some businesses are considered communal, there are many clear cases where only one spouse has helped the business thrive.
What Happens to Companies and Partnerships When a Business Is Involved in a Divorce?
In a high-asset divorce case where one or both spouses own a business and get divorced, it is necessary to value the business if it is considered marital property. Typically, the court considers businesses’ marital property. Solutions include one spouse buying out the other, selling the business, or continuing to operate as co-owners. Valuation is crucial, and prenuptial or partnership agreements often dictate the outcome.
Determining Ownership of a Business in a California Divorce
Determining business ownership in a divorce involves identifying if the entity is marital or separate property, primarily based on when it was acquired, funding sources, and spousal contributions. While businesses started before marriage may be considered separate, any appreciation in value during the marriage is often subject to equitable division.
Pre-marital businesses can become partially marital if their value increases through joint efforts. Courts consider contributions by each spouse, including sweat equity (non-financial contributions), to determine the equitable distribution of the business value. Professional financial valuation is crucial to ensure a fair outcome, particularly for valuing intangible assets such as goodwill and intellectual property.
Hire a High-Asset Divorce Lawyer to Protect Your Interests
Dealing with business ownership and interests while navigating a high-net-worth divorce in Los Angeles can be challenging, especially when you’re also trying to handle the emotional aspects of your situation. At Kramer & Zitser, LLP, our dedicated family lawyers in Los Angeles share over 50 years of legal experience and are led by senior attorneys with a passion for justice.
Our extensive knowledge of divorce and asset division laws allows us to fiercely protect our clients’ interests and livelihoods. We understand just how important it is to help you keep your business interests and are prepared to leverage our negotiation skills, legal knowledge, and litigation experience to advocate for you.
FAQs
How Does Divorce Affect a Business Partnership in California?
Divorce can severely impact a business partnership by forcing the division of ownership stakes, introducing a new spouse as a new partner, or requiring a disruptive buyout. It often leads to financial strain, reduced operational productivity due to distractions, and potential valuation disputes that may force a business sale or restructuring.
Does Having an Established LLC Protect Assets From Divorce in California?
An established LLC does not automatically protect a business and its assets from division in a California divorce, as courts often view a business as a marital asset if it was acquired or appreciated during the marriage. While an LLC shields assets from business creditors, it does not prevent a spouse from claiming an interest in the business’s value, especially if marital funds or labor were used.
What Assets Are Untouchable in a California Divorce?
In California, untouchable assets in a divorce generally include separate property. Separate property includes assets that were owned separately before a marriage occurred or given solely to one spouse through a gift or inheritance while they were married. These assets are not subject to the 50/50 split.
How Do You Determine the Value of a Business During a Divorce in California?
In California, business valuation during divorce determines the fair market value of the community property interest, usually at the time of trial. Financial professionals, often forensic accountants, analyze three to five years of tax returns, financial statements, and goodwill using income, market, or asset-based approaches to estimate what a willing buyer would pay for the business in question.
Your California High-Net-Worth Divorce Lawyers
When it comes to business ownership and high-net-worth divorces in Los Angeles, you can trust the devoted senior attorneys at Kramer & Zitser, LLP, to work for you and your interests. With more than five decades of legal experience, our Los Angeles divorce lawyers have the knowledge needed to protect your rights, assets, and privacy. Contact us to schedule your initial consultation today.
