Dividing a Business

Bohm Wildish: Divorce Business Ownership – Divorce finance is complicated as it is, but trying to divide a business makes it extremely vital to know the process before making business decisions. The business is typically an asset and a source of income for the couple.

Certified divorce financial analyst Patricia Barrett provides a few tips in an article in Examiner we share below:

First determine if the business is separate or community property- is it shared or owned solely by one person. Often the contribution percentage of each spouse to the business must be calculated. Even if both people have not contributed funds, a marital interest may exist. An experienced Orange County divorce attorney can evaluate all of this.

The key elements in deciding if a business is separate or community property:

  • Source of funds
  • Date of valuation at time of divorce
  • Date of marriage
  • Spousal business contribution

There are typically three options to divide a business that is community property:

1-   Both parties continue to own the business

2-   Sell and divide profits

3-   One spouse keeps business and offsets half the value with other assets.

The equity in homestead is often used as offset for the buyout, but cash flow needs will be considered as well. Other assets used include IRAs or 401Ks, securities and cash equivalents, or property settlement notes.

As you may see, dividing a business in a divorce is rarely simple. It requires a lot of discussion and knowledge of the financial situation. Be sure to consult an experienced divorce attorney before making these important decisions.

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