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What happens to a family business if the owners get divorced?

As many California residents have found out, marriages sometimes come to a premature end, and when a couple separates, there can be many complications. One of the issues these estranged spouses might have to deal with is how to address a business when the relationship falls apart. There are different options available to business owners, from selling the company and sharing the profits to keeping the business together and finding a way to continue working as co-owners.

As a community property state, California has specific laws that can affect what happens to certain assets during the property division stage of a divorce. However, for owners who have not yet married, preparing a prenuptial agreement that clearly establishes what will happen to the business if the prospective marriage ends is one way of handling it. As is the case with all matters covered in such an agreement, complete and full disclosure by both parties is essential. After the marriage if there is no such document, spouses can also opt for a buyout agreement that might help to prevent the ruin of the business.

Couples can also opt to continue working together in the family business. However, this might be challenging for those who are going through a complicated and emotional breakup. In that case, they can choose to sell the business and split the proceeds, but this option sometimes forces couples to work together for an extended period of time as some businesses are not easy to sell. If the company is in debt, another option couples have is to bring in an additional stakeholder.

As there could be a few alternatives available when it comes to handling the family business during a breakup, a business owner in that situation might seek the guidance of a family law attorney. In many cases, the couple and their respective attorneys can negotiate a mutually-acceptable agreement rather than leaving the matter in the hands of a judge.

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