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Dividing a Business in a Santa Barbara Divorce

Jul 26, 2023 | Divorce/Marital Dissolution

Divorce is a complex and arduous process, especially if the couple owns a business together. Santa Barbara business division takes time to complete, and you may find yourself struggling to understand the small intricacies. California is a community property state, meaning if your business, which is considered an asset, was purchased during your marriage, it is eligible for division.

All of this can sound confusing, and there are specific details you may not know about. At Drury Pullen Law, we work closely with divorced couples who are having conflicts regarding property division. We know this is a challenging time for you, which is why we want to ensure the process runs smoothly and fairly.

Dividing a Business in a Santa Barbara Divorce

How Does Your Business Get Divided?

In California, your business will be given a monetary value. In some cases, you and your ex-spouse may decide to share ownership after a divorce. Your business will be divided if the two of you can’t agree on a set of terms. Your business will be split evenly in this case. Typically, your business will be considered separate property, meaning it was bought before the marriage. Each of you will receive the assets you owned before getting married.

When a business gets divided, a forensic accountant is brought in to value the assets involved in the business. Once this is complete, the spouses then must decide what to do with the property, such as:

  • Selling the business entirely.
  • Liquidate the assets from the business before selling it.
  • Continue the business and create an ownership agreement.

You and your ex-spouse may want nothing to do with each other, which makes agreeing on some terms near impossible. In order to make the process simpler, it’s recommended to speak with legal representation.

How Can I Protect My Business?

Selling or dividing your business can be complicated, and if any step of the process is done improperly, you could lose it entirely. It’s essential to protect your business as much as possible, and there are several strategies to consider using, such as:

  • Placing the business in a trust – When you place the business into a trust, you won’t be considered the owner. Instead, the trust will own the business and cannot then be considered a marital asset.
  • Prenuptial and postnuptial agreements – These agreements are created before marriage to determine how assets will be distributed should a divorce occur later. While these agreements can still be contested later, your business will most likely be protected by the terms of the agreement.
  • Don’t commingle the assets – In other words, don’t mix the assets altogether. This makes it clearer which assets are business or marital funds.
  • Consult a lawyer – Protecting your assets is crucial when going through a divorce. We’ve met many clients who have discussed how the legal system in Santa Barbara can be tricky to navigate through. Fortunately, it’s possible to do.

Speaking with legal representation may be the most favorable option if you have concerns about how your business will be separated after a divorce. Couples who can’t agree should contact a knowledgeable lawyer for assistance.


Q: How Is a Business Split in Divorce in California?

A: Generally, businesses in California are split evenly between the ex-spouses. Because California is a community property state, all assets, including your business, can be divided evenly after the divorce is finalized. The only exceptions to these assets are gifts, debt you accrued before the marriage, and anything you buy or sell with separate property. Businesses are valued to determine the cost. They will be divided if no other arrangements are made.

Q: How Are Stock Options Divided in a California Divorce?

A: Stock options obtained during your marriage will be split evenly after the couple divorces. If you had stock options before marriage, these return to their owner, as these are considered separate property. However, if the couple creates an agreement on how they wish to divide assets, such as a prenuptial agreement, the division will be done according to those terms.

Q: How Do I Protect My Business From My Partner During a Divorce?

A: We’ve worked with many clients over the years who were taken advantage of by their ex-spouses. Fortunately, you have legal options on your side. You could place the business in a trust to prevent your partner from having control over it. Any agreements you and your ex-spouse made in the past, such as a prenuptial agreement, can be brought forth. You can also negotiate with other assets you have. If there are business assets you don’t wish to control after the divorce, you can trade them.

Q: What Happens During a Business Valuation?

A: When a forensic accountant is called in to evaluate the business, they’ll put a price on the various assets and the business as a whole. They’ll analyze the sales proceeds, liquidation value, capitalized earnings, and more. After the value of the business is determined, it can then be divided depending on prior agreements or distributed equally between ex-spouses. Depending on their findings, your assets may be divided a certain way if you made no previous agreement.

Drury Pullen Law: Your Business Division Law Team

All aspects of divorce can be difficult to work through and address fairly and efficiently. Couples who started a business only to opt for divorce later may conflict with each other over who gets what. These arguments can be emotionally charged and prevent meaningful progress from being made. In any case, it’s advised to speak with an experienced legal team if you’re divorcing in Santa Barbara.

At Drury Pullen Law, we know how overwhelming divorce and business division can be. You may have invested thousands of dollars in your business, and we don’t want you to lose it. Using our knowledge of California law, we can adequately evaluate your business and determine how to divide it. We want the most desirable outcome for this situation, and we’re prepared to help.

For any questions or concerns regarding divorce or business and property division, contact us today.

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