Couples in California who are getting a divorce and who own a business will have to get that business valuated for the purposes of property division. They can either keep the business or sell it.
Some couples are able to continue running a business together despite getting a divorce. In most cases, this is not possible, but one person might want to keep the business. That person would need to buy out the other spouse. A person with sufficient liquid assets can do so by directly purchasing the other spouse’s shares. This is usually not considered taxable since it happened as a result of divorce. However, if the person cannot buy out the spouse up front, it might be necessary to use a settlement note or have the company buy the spouse’s shares. There may be capital gains tax to pay.
When neither spouse wants to keep the business, it can be sold. Spouses will need to decide whether they will continue running it together as they are waiting for the sale to happen since this could take some time. It might even slow down the divorce process.
There are a number of other complications around property division in divorce that spouses need to negotiate. For example, a home could cause some of the same issues as a business with neither spouse able to afford to buy out the other and a long wait before the home sells. Couples may want to consider an alternative dispute resolution method, such as mediation or collaborative divorce, to help them resolve these and other issues. Reaching a decision about property division without going to court could mean that the couple stays in control of the final agreement. However, these approaches are not appropriate in every situation, and litigation may sometimes be the best option.