How Will a San Diego Divorce Affect Business Owners - Valuation

How Will a San Diego Divorce Affect Business Owners

Pierre Domercq Professional Practice & Business Ownership

How will a San Diego divorce affect business owners?  If you have or your spouse have your own business, own an interest in a company or are part of a professional practice you are probably wondering what will happen to it during the divorce.  Will the divorce affect normal business operations?  How will the community property interest in the business be handled?

Generally speaking, business operations continue as normal during the course of the divorce unless the spouses were working together in the company and cannot do so going forward.  Each case is unique and quite legally and financially complex.

A word of warning from the outset: if you are the owner of a business and you are concerned about the question of “how will a San Diego divorce affect business owners?” it is not wise to attempt to falsely portray the performance or value of the business.  The Court and the counsel of your spouse will be watching for attempts to hide or shield income, even if it began months before the divorce was filed.  Underpayment of a principal or professional or reducing business volume to lower the potential value of the business will be revealed during the course of the divorce.

In one recent case, the business owner substantially lowered not only what they were paying themselves but the actual flow of business into their company for several months before asking their spouse for a divorce.  During the forensic analysis of the books these discrepancies came to light.  The Judge in that case used the average income and business volumes of 3 previous years to establish valuation.  In addition, sanctions were applied to the business owner’s share of community property distribution for attempting to falsely lower the value of the marital interest in the business.  The business owner appealed this decision and lost.

How will a San Diego divorce affect business owners?  The Court must establish the community interest in the business or professional practice (if any).  This is usually accomplished through “valuation” by an expert appraiser.  Valuation can be a contentious process as the spouses often have opposing interests in raising or lowering the valuation itself.

Ultimately, the parties must reach agreement (usually in mediation) or the Judge in your case must establish the valuation.  Here in California community property is divided equally between the partners.  If the business owner wishes to keep their business they must “offset” the marital interests of their formal spouse with other assets or community property.

If you have asked yourself “How will a San Diego divorce affect business owners?” you need the advice and counsel of the proven and experienced San Diego Certified Family Law Specialists at Burke & Domercq.  We have handled numerous divorce cases involving a business interest over our decades of service to North county and San Diego family law cases.

Protect your own interests and contact us or call 760-434-3330 to schedule an appointment for a remote or socially distanced consultation with one of our experienced Certified Family Law Specialists.