Divorce can have a major impact on a business

When a marriage comes to an end, the more marital assets there are to divide, the more complicated the split may be. Couples in San Francisco who own businesses probably know that a business is likely to be affected by a divorce situation. There are some things that could be done to minimize the impact of a divorce on a business and/or an owner’s income from that business.

Community property state

There are several factors that come into play when ascertaining how a company might be affected by the end of a marriage. California is a community property state and in a divorce or a legal separation, property that was acquired during the marriage by either spouse is owned by each spouse equally — 50/50 straight down the line for assets and debts (with some exceptions). Shareholder interest in a business falls into this category.

Take steps to minimize the blow

Having either a prenuptial or postnuptial agreement in place may help to keep the effects of a divorce on a business to the minimum. These documents are typically straightforward when it comes to how a business will be affected should a couple divorce as well as illustrating how an individual’s financial interest in the business will be managed.

A San Francisco family law attorney may be able to enlighten a divorcing entrepreneur about the other steps that can be taken to protect a business from divorce such as:

  • Keeping family assets separate from the business
  • Setting up a trust to protect the business
  • Taking out a whole life insurance policy to cover the cost of the divorce process without affecting the business directly.

It is wise to seek independent legal advice on what options exist when a business figures into a divorce.