What Happens To The Company You Run With Your Spouse After Divorce?

Posted by: Gerald A. Maggio, Esq.

Orange County Divorce Attorneys; The Maggio Law FirmMany married people did not even think in their wildest dreams that would get divorced one day. This is especially true when the spouses work with one another. Irrespective of what decision you arrive at, these are some of the important things you need to sort out in your business while your divorce is underway.

You need to be clear about creating divisions between emotional, financial and legal issues

Any divorce is not just a legal split between married couples. When both of you are working together, you should be serious about sorting out ways of dealing with your business, any kids you may have from your marriage and finances in the best possible manner. More importantly, you should make it a point, to begin with segregating these issues, desirable outcomes and needs.

When you are on the verge of coming out of your romantic relationship, there is a tendency seen to let personal concerns complicate the business relationships. So take some time to establish what your specific requirements and desirable outcomes are in different areas with distinct and concrete plans and goals.

Do not be on the journey all alone

Though you may be somewhat prepared now to receive financial and legal aid, remember that it will be a great morale booster when you have some people by your side to support you emotionally. Some experts even recommend counseling. In case you and your former spouse continue to work together but raking up emotional issues from the past in your work, it can be quite tough to manage a business effectively. It is recommended that you form a team comprising of professionals, family, and friends who can help you to get over your emotional and psychological dilemmas.

Take a break from your work

Irrespective of how amicably you parted from your spouse after the divorce. There is bound to be a transition period. So, take some time off from whatever you had been doing previously and try to introspect what you actually want, rather than acting on an impulse and trying to stick together stubbornly or breaking up your business. After all, time does heal everything.

Your roles need to be defined

Not only does your relationship need refining after the divorce, but you should also embark upon drawing clear boundaries around your various responsibilities and roles at work. Proper identification of the task each person will be doing needs to be properly defined. This will facilitate in ensuring that you do not give to micromanage one another.

Getting divorced in California can be complicated! Click this link to download our free eBook, 18 Important Things to Know About California Divorce to educate yourself on the process.  

What To Know About Business Valuations In California Divorces

Posted by: Gerald A. Maggio, Esq.

orange county divorce lawyers; The Maggio Law FirmProfessional business valuations is an expensive task in any marital dissolution. The spouse who manages the business quickly realizes that techniques used to value the practice have no relation with the practice’s fair market value. The spouse can then in all fairness insist that no willing buyer can be found. There can also be concerns regarding “double dipping”. This comes as the same earnings used to calculate a value in such a practice can also be utilized for calculating the support. In case the practice has a value of marital efforts, it must also be divided.

In California, a number of cases have reviewed techniques utilized by experts when valuing any professional practice. One consistent factor common between all decisions is the court will honor any technique for valuing such a practice. This includes goodwill. These will remain true as long as value is legitimately established by the evidence.

General principles

A trial court, when determining the value of any professional practice, must find out existence and the value of a number of factors. These include fixed assets like furniture, law library, cash, supplies and equipment and a number of other assets like accounts receivable, costs advanced with collectability chances, work in progress that are partially completed, but not receivable billed, and also work which is completed, but not yet billed. The practitioner’s goodwill in his business as going concern and the practitioner’s liability related to the business.

Other general principles include the business nature and enterprise history from the time of its inception. It also includes the general economic outlook and also the outlook and condition of the particular industry concerned. The stock’s book value and the business’s financial condition also plays a  role. The company’s earning and dividend paying capacity are also important.

Value standard

Unlike when assets are to be divided in kind, Californian courts can be obligated to rule on assets values and then divide them equally. Considerable debate has been allowed to find the proper standard to use in valuing marital assets. This is more fueled by the imprecise use of court terms like “going concern value” or “investment value”. The worst term is “value”.

Treasury regulations in the United States define fair market value as price in which property will communicate between a buyer and a seller. They both should not be under any compulsion to sell or to buy. Both must also have relevant knowledge about the facts.

Getting divorced in California can be complicated.  Download our free eBook, 18 Important Things to Know About California Divorce to educate yourself on the Orange County divorce process in California.  

How To Run A Family Business With Your Ex-Spouse

Posted by: Gerald A. Maggio, Esq.

Orange County divorce lawyers; The Maggio Law FirmStatistics claim that the United States alone has about one million businesses jointly run by couples. At the same time, as many as 9,00,000 divorces get filed each year in the country. Now, that also means that several marriages where a husband and wife run a joint business form a component of their marital assets will also end in divorce. But there need not be any dissolution of a business partnership just because the marriage has ended.

If a marriage gets dissolved and there is an involvement of a jointly-run business, then the options available are limited and may be associated with their own set of complications, Firstly, such a business could be sold; secondly, any one of the former spouses, who is a partner too can buy the share of the other partner; thirdly, the divorced couple can also continue running the business jointly.

Check out the following tips if you and your ex-want to run your jointly owned business even after your split.

Mutual recognition is crucial

In order to run such a business in an effective manner, both the parties should respect and realize the contributions made by the other party and acknowledge that each one of them added their valuable skills to their business. They must also recognize that such skills still have high importance and will continue benefiting their business in the future. While it is not necessary to praise your former spouse every now and then, it is also important to recognize your stakeholder’s contribution in the jointly-owned business

Role definition is a must

It is possible that the once married couples cum partners may not be attending similar meetings or continue managing the same affairs. When one is looking after business operations and the other partner is into sales, things are manageable. However, if both the partners manage the daily operations of the business, things may not work out. It is a normal phenomenon to find that divorced couples may not see eye-to-eye on several issues. Hence, it makes sense to minimize situations where direct interactions may take place.

Partners should show maturity

There are some behavioral traits, which can help to make this work. When a marriage gets dissolved it is normal for the exes to be not in the best of terms. Hence, it is important for both of them to exhibit more maturity by keeping their emotions in check so that the business benefits at the end.

To stay as business partners even after the dissolution of a marriage partnership may work reasonably well if both the partners work hard and continue contribution in the same manner as they used to while being married.

Getting divorced in California can be complicated.  Download our free eBook, 18 Important Things to Know About California Divorce to educate yourself on the process.  

3 Ways Small Business Owners Can Protect Business Assets In Divorce

Posted by: Gerald A. Maggio, Esq.

Orange County divorce lawyers; The Maggio Law FirmDivorce is a stressful experience, especially when it involves the division of properties, assets and businesses. For some, it is even more painful because a business is about all they have and splitting the business in two can cause a lot of financial damage. Small business owners know how tough it is to operate a business when the economy is constantly changing. Include a divorce and the stress reaches to new levels. So, what should a business owner do at times like these? They can follow three easy steps to limit the impact to their business from divorce.

  1. Maintain an amicable relationship with your ex

Nothing like a good talk between spouses when it comes to splitting businesses and assets. That’s the first thing you should do when faced with a similar situation. If your spouse is a business partner with you, it becomes even more crucial why an amicable relationship is necessary. Focus more on the business part and less on personal matters. An honest talk with your spouse can have great benefits for your business.

  1. Make prenuptial and postnuptial agreements

A prenuptial agreement is not the best gift your future spouse might be expecting from your side but it is more of a gift for your own self. It’s always better to stay optimistic about marriage. Signing a prenuptial agreement will give you the upper hand in business ownership. California is a state that has community property laws which mean that every property bought after marriage is likely to be split equally between both partners. In such cases, a postnuptial agreement comes in handy. It helps determine what part of the business each of you should own after it gets divided.

  1. Form a corporation or a trust

One of the best ways to protect the company and business assets is by forming a corporation or a trust. It’s best to incorporate the trust before you get married. It gives you sole ownership over your business and during divorce proceedings it becomes easy for you to defend it against a division.

If you form your company as a corporation or an LLC, you create a legal entity that is separately owned by you. However, if you use marital assets to pay for company expenses, it may be used to claim the company as a marital property.

By following these 3 steps, you will be able to avoid or at least minimize the damage a divorce can bring to your small business.

Getting divorced in California can be complicated.  Download our free eBook, 18 Important Things to Know About California Divorce to educate yourself on the process.  

Dividing A Business or Professional Practice In Divorce

Posted by: Gerald A. Maggio, Esq.

Orange County divorce lawyers; The Maggio Law FirmSimilar to the other assets and property, the business and professional practice is also subject to division between the two parties involved in a divorce. The first consideration to be made in the deciding upon the division of a closely held business or professional practice is to determine whether it falls under the category of separate or community property.

Determination of a business or a professional practice as separate or community property 

The basic guidelines of establishing a business or professional practice as a marital asset are similar to those employed for other property and estate. A business or professional practice which was owned and operated by either spouse before he or she got married will be considered as separate property. However, if the spouse continued to operate the business or professional practice even after their marriage, the property will be considered as community and subject to adequate division in the event of a divorce. In addition to this, even if the business or professional practice is established as separate, the increase in its net worth will be considered as community property. 

Evaluation of the value of a business or professional practice 

There are several factors which are considered while assessing the value of a particular business or practice for the purpose of division in the event of a divorce. A professional appraiser will take into account the individual values of the real estate, inventory, finished goods, amount receivables, bank balances and even the goodwill of the said business to determine its net worth. Similarly, the value of a professional practice such as legal, medical, architectural or accounting will also be calculated on the basis of the individual worth of its physical property, account receivable, fees and goodwill. The most difficult aspect of assessment is the evaluation of the goodwill of a business or practice, since it is largely intangible and cannot be determined via simple figures and statistics. 

Distribution of the business or professional practice 

The final and most complex step in the process is the actual division and distribution of the business or professional practice between the divorce partners. In a majority of divorce cases, the owner of the business or practice is expected to compensate for the ex spouse’s interest in the property by ‘buying out’ of other partner’s interest as part of the division of property.

Getting divorced in California can be complicated.  Download our free eBook, 18 Important Things to Know About California Divorce to educate yourself on the process.  

 
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