How will a divorce settlement be determined when a jointly owned business is involved?

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How will a divorce settlement be determined when a jointly owned business is involved?

Married 5 years. Quit my job to help his business grow. I own 30%; he owns 70%. I have received a paycheck from our business for 3 years. I have increased his business income by about 300%. Company owns a condo in CA, the business office is there and in FL. No children together (I have one from prior relationship). He has been accused of sexual harassment twice now and I want divorce. What will be the financial details?

Asked on May 31, 2011 under Family Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

There will not be any child support in this situation.

Since California is a community property state, the majority of property acquired during marriage will generally be split 50-50.

In terms of the business, the baseline is that you would own 30% of it--your ownership stake. However, it may be possible in the divorce to show that you should have a larger share, to reflect contributions or sacrifices you made to grow the company. This is something to discuss with your divorce attorney, but assume that, based on the evidence you can muster and the contributions you made, that you will end up being able to establish ownership of 30% - 50% of the business.

Valuing the business, of course, is a trick in and of itself, if its a small, illiquid business. Still, the fact that the company at least seems to own some real property creates a baseline for valuation.

You may be able to also get some spousal maintenance or support, given that while you had a job, it was from the business--e.g. not an independent source of income.


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