Although your California business is not a party in your divorce, you still need to address ownership issues in negotiations. If you fail to address these issues related to your business, you could suffer consequences regarding the settlement or even after divorce papers are signed. Consider the following.
Use language that makes all points clear
In any divorce document concerning your private company, ensure that the language within is clear. The spouse transferring company rights should detail items like dividends, distributions, retirement contributions, health benefits, deferred compensation expense reimbursement, and any other applicable points. The language used should be broad and inclusive. Both spouses should also issue a statement that releases them from all claims from the company that may exist at the time of the divorce.
If you are the transferring spouse, make sure to get indemnity insurance if the company is named in a future lawsuit. Generally, this insurance will pay for any legal counsel required for a specified number of years. In some cases, you may need to consider whether your ex-spouse will post a threat to the company regarding intellectual property. If so, you may want to put a non-competition clause in your final divorce agreement.
Protecting yourself and your company
Whenever you file for divorce, you must follow California’s requirements and complete the appropriate forms. This process becomes even more complicated when a private business is part of the property division. Take your time before signing final documents to ensure that you have the company’s best interest considered as well as your own.
Taking the time, in the beginning, can save you considerable time and money in the future. All divorces are contentious to a degree. The ultimate goal is to reach a fair settlement with your spouse and protects your interests.