Is My Spouse Entitled to Half of My Business in Divorce?

A guest author discusses businesses and property division in California divorce cases.

Divorce is a complicated process that often requires the division of community property.  Unfortunately for business owners, their business may also be deemed community property and subject to division.

The Rule in California

In the State of California, within the context of divorce, a business is considered an asset that needs to be characterized and valued. Briefly, characterization refers to the classification of the business as community property, separate property, or a combination of both.

Valuation refers to what the business is worth. Unfortunately, California family courts may not take your estimate; in many cases the estimate needs be completed by an accountant or other financial professional.

How much, if any, of your business your spouse is entitled to will depend on the characterization and valuation of your business. A consultation with a family law attorney will help you determine whether the business is community property and subject to division in divorce.

Special Considerations and Scenarios

Business associations like divorce cases can be complicated. When and how you started your business can make a difference as to whether you keep this asset in full or will have to split it with your spouse. Other factors can help you keep your business or at least a bigger portion of it.

If you started your business before you got married to your spouse, the family court will want to know some details, such as the time between the start of your business and when you got married. They will also want to know the value of the business at the time of marriage and whether its value has increased. 

It is understandable that you do not want to split your business when you started the business with your own separate funds. It is also possible that you have a business partner and cannot buy them out without losing your business. Perhaps you have a family business you inherited before or after your marriage. To determine whether the property will be split with your spouse, the court must consider particular factors such as:

• Is the business fully yours or split among family members?
• Are your parents maintaining ownership interest?