California Self-Employed Divorce Tips

Every divorce comes with its challenges, but if you are self-employed and/or have a self-employed spouse the challenges can become more complex. If you currently own your own business and you are getting ready to file for divorce, there are some details you should prepare to discuss with your attorney. Many challenging issues arise in cases like these, so hiring an experienced attorney is crucial to your success.

Top tips for divorcing if you’re self-employed.

Organize Information.

This is one of the most important parts of preparing for any divorce, but especially when you are self-employed. It is essential you gather pertinent information regarding the business' income, expenses, assets and debts. Do not try and hide any information from your spouse, lawyer, or the courts - it will come to the surface during the discovery process and you will look untrustworthy. It will also inhibit your attorney from advising properly. Make sure you have more than one copy of important documents and keep them in a safe place. It is helpful to have as many years of information and financial documents and tax returns as possible, to ensure your attorney can assist in steering you toward the best outcome.

Consider Hiring an Expert.

Since you are self-employed, your spouse may allege that you are downplaying the value of your business. By hiring a qualified expert (e.g. forensic accountant) to look at the finances of your business , you will be better prepared.  An qualified expert and your attorney can help you formulate a plan for future arguments regarding the value of your business are showing total transparency and that you are prepared. Having a business evaluator that acts as a consultant can also help you formulate a plan for future arguments regarding the value of the business - this is incredibly helpful as evaluating businesses is can be quite complex and susceptible to many valuation models.  Your attorney shold also have an excellent grasp on the possible models.  Understanding valuation approaches such as an Asset-Based approach, Income Approach or Market Approach are just the beginning.  As experienced family law attorneys that have represented many divorcing business owners over the years, we understand and advise business owner clients what these approaches often entail and how they may affect the individual businesses value.

Assess Alimony.

Spousal support or owing alimony will have an impact on anyone's finances, especially when you own your own business. Depending on how financially successful you are compared to your spouse, you could be receiving alimony or paying it. Courts consider many different things when creating court-ordered spousal support orders like each person's age, financial condition, and standard of living during the marriage. Self-employed individuals will have their “income available for support” scrutinized. Understanding what plays in to this income is vital. Issues such as “add-backs”, disallowed depreciation, disallowed personal expenses, and other issues are all things that you need to be aware of…an experienced family law attorney will be able to spot these things and advise you appropriately no matter the type of business you have.

Have Realistic Expectations.

Going into a divorce when you own a business can be daunting. Keeping your business running should be one of your top priorities. However, be prepared to give up some other things that are not pertinent to the existence of your business - consider those to be an investment to keep your company afloat and possibly thriving after your divorce.

Interview Divorce Lawyers.

It is incredibly important to find a divorce attorney who has dealt with similar cases as yours. Since many judges do not have a background in business, it is important to have a family law attorney who understands the complicated law relevant to income and business evaluations. Your attorney should be familiar with how to present your information in a way that educates the judge by using the applicable case law, standards of valuation, expert testimony and objective conclusions about the value of your business. Choosing a lawyer you trust and feel comfortable with is crucial to your success.  Our law firm has handled many dozens of cases over the years, including all types of professional practices.

Know Your Business and It’s Value.

This one seems like a no-brainer, but it is vital to know the ins-and-outs of your business to ensure you are prepared for anything when it comes to divorce. You should understand and be able to clearly explain the nature of your business , who is involved, how records are kept, etc. If you have an C-Corp, a limited liability company, or a partnership, there are many documents that you will need during the divorce case. Some of these documents include shareholder agreements, articles of incorporation, buy/sell agreements, bylaws, etc. These documents will provide pertinent information you will want to have when going to court.

Preparing for a divorce when you are self-employed can feel scary and overwhelming, but preparation is key. Make sure you know every little detail about your business and hire a trusted family law attorney who has experience dealing with similar cases. When you properly prepare the documents needed and work with the right person, divorce while self-employed isn’t that scary. If you are considering a divorce and want to know what your options are, don’t hesitate to reach out to us. We would love to help you better prepare for your future so that you can move on easier.