Issues of
family law and community property often arise in the course of business legal
planning. Although nobody likes to think about it, divorce
happens. As with many risks, the best way to minimize the potential
for problems is a thorough understanding of the law and thoughtful planning.
California defines community property as
any property acquired during marriage that is not acquired by gift or
inheritance. Although community property rules are a mainstay of the
family law courts, they also are an important issue in the context of a family
owned business. These rules apply to spouses as well as registered domestic
partners in California
One area where this comes up frequently
is the manner in which stock in a Corporation or membership in an LLC is
held. If a couple is incorporating a business or starting an LLC, they
must decide how they want to hold title and what their respective ownership
rights will be. Just like with title to real property, corporate stock or
LLC memberships can be held in a variety of different forms, each with their
own implications. Each situation and circumstance is unique and calls for
a thoughtful decision to be made by the couple. A consultation with an
attorney to discuss how to hold ownership interests in a business can help minimize
problems later in the event of a divorce and can also be extremely beneficial
with respect to the couples’ estate planning.
No matter how the ownership interests
are held, divorce of business owner spouses may be a difficult challenge to
overcome. If the couple is not able to continue to work and run the
business together, then the couple may need to sell the business to an outsider
or have one spouse or partner keep the business and offset the value with other
marital assets. Both of these latter options require a proper valuation
of the business which is often difficult once owners are no longer on the same
page. If the business owners define in advance the methods and
manner they will use to value their business, it can reduce valuation and litigation
expenses in the future.
Although nobody plans for divorce, it is
a reality that must be addressed in business planning for spouses and domestic
partners. Couples entering into business together should understand
California’s community property rules and should hold title to the business in
a way that best suits their needs. If you and your spouse own a business
or are starting a business, call Alvis Frantz and Associates 925-516-1617 or email info@alvisfrantzlaw.com to schedule a consultation
now, to protect for tomorrow.
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Copyright © 2012 Alvis Frantz and Associates.
