A poorly planned divorce can disrupt both spouses’ lives for years, and, in some cases, neither spouse may ever fully recover. This is particularly true when one spouse owns a business and does not take the steps to protect the business from the divorce.

Here in California, divorce is more complicated for business owners than it may be for those living in other states. Community property law requires equal division of marital property between divorcing spouses, and businesses started during the marriage are often marital property. If you own a business and see divorce in your future, or if you are already in the process of a divorce, you must make some important decisions very quickly.

Divorce protection through prenuptial and postnuptial agreements

If you took precautions to protect your business with a prenuptial agreement, you may have a much easier time keeping your business intact while your marriage dissolves. However, simply having a prenuptial agreement does not mean that your business is safe. Make sure to review the document carefully to understand its terms and anticipate any issues your spouse may raise.

In some cases, a spouse may agree to a postnuptial agreement that protects a business, but these typically do not have the same legal weight as a prenuptial agreement. Professional legal counsel can help you assess your circumstances and determine how to confidently move forward.

Valuing the business

An unprotected business typically qualifies as marital property, meaning that your spouse may possibly claim half of your owned value in your business. In order to make sure that they do not falsely inflate their share of the business, it is wise to use a professional business valuation.

Through valuation, you can gain a clearer understanding of the actual value of your business, which is not an easy thing to assess. With a strong understanding of the business and its potential in the future, you can make more informed decisions about how to divide it or compensate your spouse in order to keep all of the business ownership to yourself.

Create a divorce strategy for your best future

Divorce requires you to face a number of difficult decisions, and they may seem so large that you cannot see past them to a future where you are stable and living well. As you create your divorce strategy, make sure to consider what is truly in your best interests in the long run.

A clear, well-designed divorce strategy keeps your rights secure and allows you to focus on your own needs and priorities as you move from one chapter of life into another, more fruitful chapter.