California is one of nine states that observes community property, according to California Courts. Community property is any asset or debt acquired throughout the marriage. Conversely, separate property is anything owned prior to the marriage or that one spouse receives as a gift or inheritance. Businesses owned by one spouse or both are examples of property that the couple must divide in a divorce. We have assisted many business owners through all manner of complications that can arise when dividing a business.
If you inherited your business from your parents, the company is separate property. However, the distinction known as “commingling” begins when separate property and community property combine. For example, investments in a business by either spouse during the marriage are community property. All investments, both known and unknown, will require assessment during the business valuation period.
The distinction of commingling also applies to this property for any investments made by you or your spouse. In all cases, the level of your spouse’s personal involvement in the business will be a critical deciding factor when dividing up the asset. So, even if your business was solely your own before the marriage, it is still subject to a split if your spouse has had any involvement with its operations or growth.
If you cannot come to a settlement out of court, the judge will determine how to divide the company. Due to the various considerations involved in assessing fair ownership, a 50/50 split is not always guaranteed. For more information about the division of property in a divorce, please feel free to visit our webpage.