Business and Divorce Attorney in Los Angeles, California
How is a business divided in a California divorce?
How is a business divided in a California divorce?
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in california
we are a community property state which
means that all assets acquired generally
during marriage are community property
and would be divided equally so with a
with respect to something like a bank
account you can divide the balance and
one party takes half of it and the other
party takes the other half of it with a
house or a business it’s
different a house two people can’t live
in the house or usually co-own the house
after they divorce so usually a house
would go to one spouse and not to the
other
and let’s say there’s equity of 500 000
in the house and one spouse gets the
house the other spouse would get
250 000
in the case of a business the court
because uh family law courts or courts
of equity the court has a lot of
discretion what to do with a business so
by way of example the court could award
the business to the
party who was operating the business
before separation
so let’s say you owned a fast food
restaurant
or franchise and there was one party
that operated that business during the
marriage the court normally would say to
that party if you want the business will
give it to you at this value and then
you would owe your spouse x
the court could
say to
the non-operating spouse i’m going to
give you a chance if you want a chance
to get this business you’ll get cash
flow from it
and then you’re going to owe your spouse
half of the value
another situation is the judge could say
both of you will continue to co-own this
business
and you know wife you’ll be the manager
husband you’ll be the non-operating
spouse you’ll be entitled to all the
financial records and you will be
entitled to half of the income
a fourth alternative is the court can
say
sell it
so you sell it to
the
a third party who doesn’t have any skin
in the game as it pertains to the
spouses
and sometimes that’s the best way to
handle it i recently had a situation
where the accountants valued a business
at four million dollars it was a
marketing business my client was the
non-operating spouse and she said i
don’t believe it’s worth four million
dollars
the court ordered it sold and it was
sold to a third party
for in excess of 150 million dollars
so had she accepted that offer she would
not have been very happy to learn that
the business could have sold for many
multiples more than the husband was
offering so sometimes that’s the best
way to divide a business put it on the
market and see what happens
Los Angeles, CA family law attorney Lisa Helfend Meyer explains how a business is divided in a California divorce. She explains that California is a community property state, meaning that, in general, all assets acquired during the marriage are considered community property and are divided equally upon divorce. For simple assets, like a bank account, division is straightforward—each party receives half of the balance.
However, with assets such as a house or a business, the division can be more complex. A house cannot typically be co-owned after a divorce, so it usually goes to one spouse, while the other spouse receives a cash equivalent of their half. For example, if a house has $500,000 in equity and one spouse is awarded the house, the other spouse would receive $250,000.
Business division involves more discretion, as family law courts are courts of equity. For instance, a court may award a business to the spouse who operated it during the marriage, requiring them to pay the other spouse their share of the value. Alternatively, the court might allow the non-operating spouse to receive cash flow from the business while owing half its value to the other spouse. In some cases, the court may order continued co-ownership, with one spouse managing the business and the other entitled to financial records and half of the income. Another common solution is to sell the business to a third party, which can sometimes yield the most equitable outcome.
She recalls a case where a marketing business was valued at $4 million, and her client, the non-operating spouse, doubted that valuation. The court ordered the business sold to a third party, ultimately fetching over $150 million—far exceeding the initial estimate. She notes that, in some cases, placing a business on the open market is the most effective way to determine its true value and fairly divide the asset.
