Property division is a frequent topic for discord in a California divorce. In many cases, it revolves around personal property like a home, automobiles, financial assets and sentimental items. For some, however, there is a business at stake. Since California is a community property state, the properties they have accrued after the marriage will be shared evenly in the divorce. This can impact how a business is divided. Of course, there may be nuance. The circumstances are key and people who are debating a business ownership and are embroiled in disputes should be aware of this.
The different categories of property and how it could influence a divorce
Even with its status as a community property state, a high-value property like a business might not be shared as part of the divorce. There are three categories of property: community/quasi-community; separate property; and commingled property. In the context of a business, if it was started after the marriage, then it will likely be community/quasi-community property. Quasi-community property refers to items that were accrued while living in another state but would have been community property had they lived in California at the time. With that, a business started in Texas would be community property in California if the couple moved to the Golden State.
If a spouse started the business before the marriage and owned it, then it will generally belong to that person once they divorce. Anything purchased with that separate property will also belong to that person. However, if the spouse who did not start the business contributed to its increase in value by working with the owner spouse or by simply making its advancement easier for the owner spouse by running the household and caring for children, then there could be commingled assets. If the assets become mixed together in this way, it can be complicated to determine who is entitled to what.
Addressing how to divide a business in a divorce
When a business is at stake in a divorce, there are viable options to consider in avoiding acrimony. Coming to a financial settlement might be worthwhile in which the business owner buys out the other spouse. Unfortunately, many people are not on good terms in a divorce. This can be exacerbated if major assets are at stake in a high asset and business owner divorce. From the beginning, it can be critical to have legal assistance to plot a strategy to achieve a positive outcome.
