California Family Attorneys Giving You the Representation You Need to Protect Your Business During a Divorce

Running a successful business and having a happy marriage are two major American dreams. From a young age, many of us dream of financial freedom and a lifelong partnership with a loved one. Many people are able to achieve both of these goals. However, sometimes, corporate success may outlast a marriage. If this happens, a business owner could find their company threatened in divorce proceedings. They may even find themselves in a situation where their former spouse gains control of part of the business they worked so hard to build. Because of this, it’s important business owners figure out strategies for protecting their investment prior to marriage.

Why Do I Need to Protect My Business Assets in a Divorce in California?

Some people may think that because they founded, inherited, or gained control of a business in California that it fully belongs to them. This is especially true if a spouse had no involvement with the day-to-day operations of a company. However, California is a community property state. This means any money, property, or assets a couple acquired during a marriage belong to both of them. This also means that, in the event of a divorce, a couple’s assets are split 50/50. Assets that are considered community property in California include:

• Money
• Houses
• Cars
• Other Real Estate
• Business Assets including Copyrights, Patents, Trademarks, and Stocks
• Savings
• Retirement Plans

Even if a spouse was not involved in the operations of a company, California law considers it community property in the event of a divorce. This is because money generated by that company was used to support the marriage. A spouse may also have made non-financial contributions to the business’ success such as emotional or moral support.
If you are a business owner who is about to get married, or if you anticipate starting a business during the course of your marriage, you may want to make certain plans to protect yourself in the event of a divorce. Planning for a potential divorce does not mean you want or expect your marriage to end. It is preparing for a worst case scenario. Planning for a divorce is no different than purchasing health insurance or having preparations in place for a natural disaster. It’s simply planning in the event something negative does occur.

What are Strategies to Protect My Business in the Event of a Divorce in California?

Business owners have several options in California to protect themselves in the event of a divorce. However, they must take these steps prior to marriage and/or divorce proceedings. There are certain steps a business owner may have difficulty taking once a marriage has been finalized. There are also steps that are difficult to make once divorce proceedings have begun. The court may see certain steps as an effort to avoid responsibility to your spouse. This could harm your chances of a judge taking a favorable view of you in a divorce. It could also harm your chances of protecting your assets in the long run. This is why it’s important to plan ahead.

Steps you can take to protect your business in the event of a divorce include:

• Prenuptial Agreements
• Separate Banking Accounts
• Trusts

A prenuptial agreement is the easiest way to protect your business. A prenuptial agreement is also known as a “what’s yours is yours and what’s mine is mine” agreement. It is a contract signed prior to a marriage that stipulates what will happen to certain assets in the event of a divorce. As long as both spouses agree to a prenuptial agreement, it takes precedence over community property distribution. A drawback is some people may view a prenuptial agreement as a sign they do not trust their partner or expect their marriage to fail. This could make getting your partner to agree to a prenuptial agreement difficult.

Another option is maintaining a separate banking account only used for business finances. Under community property, having a joint banking account is known as comingling. This means you and your spouse’s finances are combined. This makes any money in this account community property. If your spouse’s name is on any business related banking account, it could make it community property. Maintaining a separate business account could be used as evidence it is solely your asset.

Another option is placing your business in a trust. By placing your business in a trust, you relinquish legal ownership of the company. While you may still operate and financially benefit from it, it may no longer be considered your asset. This means in the event of a divorce, it could be considered separate from community property.

These are only a few of the options available to business owners to protect their companies in the event of a divorce. The best thing any business owner can do if they are worried about what would happen to their company in the event of a divorce is to consult an experienced attorney.

What Should I Do if I’m a Business Owner Facing Divorce in California?

No one wants their marriage to end. If you’re a business owner facing divorce, it could make the end of the relationship even more painful and difficult. No one wants to lose something they’ve worked for years to build and maintain. An experienced family and divorce attorney knows strategies you can put into place prior to a divorce to make sure your business is protected.

If you’re a business owner who is worried they may one day get divorced, don’t hesitate to contact Hepner & Pagan, LLP, located at 116 E Campbell Ave, Suite 1, Campbell, CA 95008, two miles Southwest of the Hamilton Shopping Center and two miles North of Los Gatos Creek Dog Park. Our experienced attorneys know the ins-and-outs of divorce when a business is involved and can help you make plans. We recognize that no one wants a marriage to end in divorce but that a plan should be in place in case it does. We approach every situation sensitively and carefully.

Everyone wants their business and marriages to succeed. Sometimes, that doesn’t always happen. If you’re a business owner who wants to protect their company in the event of a divorce, call Hepner & Pagan, LLP now at 408-688-9153 or email us for a consultation. Planning for a worst case scenario doesn’t mean you want it to happen. We can help make sure you’re protected.