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CalAttorney2, Attorney
Category: Legal
Satisfied Customers: 10244
Experience:  Civil litigation attorney for individuals and businesses.
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It's kind of an extensive question, CA, No, this is all just

Customer Question

It's kind of an extensive question
JA: What state are you in? It matters because laws vary by location.
Customer: CA
JA: Has anything been filed or reported?
Customer: No, this is all just totally theoretical and I just need information
JA: Anything else you want the lawyer to know before I connect you?
Customer: Not that I can say in a sentence
Submitted: 1 year ago.
Category: Legal
Expert:  CalAttorney2 replied 1 year ago.

Hello, My name is ***** ***** I will assist you today. Please give me a few minutes to write a response and identify any additional resources for you.

Expert:  CalAttorney2 replied 1 year ago.

What is your legal question?

Customer: replied 1 year ago.
My parents are currently thinking about divorce. No one has actually used that word, but I have known them for 27 years and know that it is coming - it could be in as little as weeks but even as long as months.
I currently work for my dad's company. I am wondering the legal logistics of their divorce with the business. Does she now control 50% of the business if they do get divorced? Can she force an audit of the business and force us to pay her in cash half of the value of the company? What if he transferred a portion of the business to me, or a portion to someone else? At what point does her legal reach extend? What if (for arguments sake) he transferred 100% of the company to me. If he did that prior to the divorce, would that be beyond her legal reach? Thanks for your help!
Expert:  CalAttorney2 replied 1 year ago.

If your parents own the company together as marital property, expect the business value to be factored into their overall family assets.

As part of the potential dissolution your parents could divide their assets in such a way that the business was distributed to your father, but an equal amount of property (cash, home, cars, etc.) were given to your mother. If there is a remaining amount of money after this split is made, then those assets would be divided.

Keep in mind, in addition to assets, your parents likely have debts as well - these debts need to be allocated or divided or paid. How they get split makes a big difference based on who took them out, what they were for, etc. (if the business has debts, they may "go" with the business as a way of lowering the value of that specific asset).

If your father were to try to dispose of the business prior to his divorce he would likely find that his division of assets in the divorce would go very badly (he would be concealing property in bad faith, and the court would likely award your mother a much larger share of property and potentially increase spousal support or other assets as the valuation would tilt to her favor - not necessarily because the actual value has changed, but because he has lost his credibility by trying to conceal assets).

Furthermore, it is possible that by accepting these assets you may even find yourself subject to litigation under the Uniform Fraudulent Transfer Act (although this is more common to civil debt collection claims) - where a creditor can directly pursue you for the debt.

If your father really wants to do some reasonable advanced planning for an impending divorce, he is going to want to speak to a family law attorney (and a business attorney). Do not try to do this on your own now and then ask a lawyer to try to clean it up later - that is a much more expensive way to go about it.

Customer: replied 1 year ago.
My dad and me built the business and she never has had any part of it. Because he legally owns it, she owns half and it is marital property, correct? It is an LLC, does that matter?
Expert:  CalAttorney2 replied 1 year ago.

What state is this in? (It can make a difference, but my advice about speaking to both a family law attorney and a business attorney is still the same)

Customer: replied 1 year ago.
Customer: replied 1 year ago.
Also, for the last 5 years I have received a bonus check because my dad has told me I own 20% of the company. I don't think he ever legally figured that out though - what are the logistics there?
Expert:  CalAttorney2 replied 1 year ago.

CA is a "community property state" - your mother is entitled to 50% of this as it was a business asset generated during the marriage.

(This is the same as if your father had worked at a company for years and earned a salary and retirement - the "community property" interest is the same).

Expert:  CalAttorney2 replied 1 year ago.

Your dad saying you have 20% interest doesn't cut it - you need it in writing.

The two of you need to speak to a lawyer (or 2 of them) promptly - your father's business needs to get straightened out (especially if you are supposed to be a co-owner) and your father needs to plan out his strategy for a divorce if it is headed that way.