Whether or not your spouse is entitled to half the value of your business is dependent upon many factors. For an accurate and thorough evaluation of your particular circumstances, we advise meeting with one of our firm’s attorneys. What follows here is a general overview of how and if a business is divided in the case of divorce. 

California is a community property state, so during divorce all marital assets are divided equally between the parties. The primary deciding factor on whether or not your spouse is entitled to half the business is whether or not the business could be considered community or separate property. 

What Does Community Property Mean?

According to the California Courts Site, “community property generally is everything that spouses or domestic partners own together. It includes everything you bought or got while you were married or in a domestic partnership, including debt, that is not a gift or inheritance.” Any assets bought with money earned during the marriage are also considered community property.

How Can I Know If My Business Separate or Community Property or A Combination?

A business is community property in cases where you began it together before the marriage, or it was acquired or created during the marriage. There are a few more questions you can ask to help clarify whether your assets are community, separate, or something in between.

Did you inherit the business? If you have kept the business you inherited from your family completely separate from your marriage, it will not be considered community property. If your spouse has played an active role in growing the business or is on the registration, they may be entitled to a portion of its value.

Do you have business partners? Your business partners are not obligated to give your spouse shares of their portions of the business. Their presence and financial investment must be taken into account.

Did you begin the business with separate or community funds? Separate funds tend to protect more of the business assets, especially if the business was started before your marriage. However, even if separate funds were used, your spouse may still be entitled to a portion of the business. For example, if community funds or their unpaid labor helped build the business during your marriage. Increases in the value of the business that occur during marriage are likely a marital asset and subject to division.

Is Your Spouse Asking For Support?

Your spouse may ask for support plus their 50% share of the value of the business. However, if you would be paying the support from the profits of the business, this may amount to an unfair division of assets. You may be entitled to an adjustment of what share of the business they are entitled to in cases like these. 

For The Most Accurate Advice, Seek Counsel

These blogs endeavor to give general help and answers, but they are written in broad strokes. The division and valuation of marital assets are complicated matters that merit significant time and attention. Answers are rarely one size fits all, and every business is different. We encourage you to contact us at 714.456.9118 or send us an email at info@voneschlaw.com for advice regarding your specific circumstances. 

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