DIVORCE – DON’T SHOOT YOUR OWN FOOT OVER BUSINESS ASSETS

If you have a spouse who owns a business, then that business is likely going to be a community property asset, regardless of whether you have ever had any involvement in either its creation or its management. Consequently, in divorce cases wherein feelings may be bruised, and emotions high, there may be a temptation to harm your spouse’s business—colloquially known as “burning down the business.” But as you now know, that business is likely to be half yours, so never harm your own property. Secondly, even if you feel that you are incapable of running your spouse’s business, you still can benefit enormously from it, post-divorce. As a going-concern, businesses are often worth several multiples of their current assets and income due to “good will,” or the tendency for customers to bring repeat business or to recommend a business to other customers. So, where you’ve got a spouse with a business, make sure that he or she stays in business. Upon division of the marital estate, that business, even if not awarded to you, may go far in determining how much of the house, the 401k, pension, or other assets are eventually granted you.

Nevertheless, if your spouse is in business, then literally THOUSANDS of dollars can be saved in a contested divorce by quietly accumulating business records and tax documents, pre-divorce, which may show what value the business truly has for your spouse. This is true because, once a contested divorce is filed, it is almost certain that your spouse is going to find inventive ways of making that business appear to be worth much less than it actually is. For your part, taking pictures of inventory on a typical day, or collecting phone records showing customer calls, all can go far in refuting your spouse’s claim that the business is “nothing more than a hobby” or that it’s a failing concern and should be shuttered.