Deciding who gets what after a marriage ends can sometimes be a difficult issue to resolve among separating couples. Going through a divorce can be challenging in many aspects of life; personal, family, emotional, and legal matters can take a poll on both parties. It can be especially difficult for business owners who don’t know the future of their business status and whether they still have full rights to it.
Understanding Separate vs. Community Property
It’s important to note the differences in separate vs. community property and how they affect one’s business rights if a divorce happens. California is considered a community property state, meaning that all income, property, and assets attained during the marriage belongs to both spouses equally and will be split equally if they divorce. If a spouse wants to keep some asset free from division, he or she must prove that it’s separate property. This usually includes:
- Property that was owned prior to the marriage
- An inheritance received by one spouse only
- A gift received from a third party
- Pain and suffering portion of a settlement they received in the past
With this in mind, one of the most important keys to look at is whether the business was started before or after the marriage began. Before a marriage, a business is considered separate property. After that, any income that is used for the marriage is considered community property. However, a family law court will divide it with “just and right” cause, looking at who owned the business beforehand.
Include your Business in a Prenup
Before you get married, always get a prenup to protect your business assets. You could go to an experienced family law attorney to get a prenup agreement that will withhold in court down the road. This will allow you both to decide beforehand which assets you both want to consider either separate or community property. By law, the prenup needs to be:
- An agreement in writing
- Executed voluntarily without coercion
- A full-disclosure agreement
- Executed by both parties; to make it more solid, preferably in front of a witness
- Within reason
Make sure that you get an experienced family attorney that can help your agreement protect your business and withstand in court in the long run.
Think Twice About How you Operate
As soon as you involve your partner in your business, the business will probably be considered marital property. If they helped you run it or maintain it, they could be entitled to some part of the business after a divorce. If it is your business to begin with, it’s sometimes in your best interest for the future to leave your spouse out of the day-to-day activities so eliminate the possibility of them seeking compensation for their contribution.
Give Up Some Assets
While this can be a challenging ultimatum, sometimes the only way to protect your entire business as separate property in a divorce is by giving up other assets to your spouse so that they settle with you taking the business. This could include marital assets like cash, stocks, real estate, or retirement funds.
Contact an Experienced Divorce Attorney in California
Many people consider their business one of the most important parts of their lives. We understand that it can seem unfair for your spouse to receive a part of the business that you worked so hard to build from the ground up. If you need legal representation to help protect your business during your divorce, the attorneys at Griffith, Young & Lass have years of experience protecting people’s rights and assets.
Contact our experienced divorce attorneys at (858) 371-5569 to discuss how we can help protect your business during a divorce.