Divorce is known to be financially draining, in addition to the many other stressors involved in the proceedings. When a couple is divorcing and one spouse owns a business, this can add financial complications. The spouse who owns the business may worry that their spouse will take a large portion of the business. The spouse who does not own the business may worry that they will be left with nothing to ensure their financial stability without proceeds or assets from a business. This is particularly true if that spouse gave up educational and career opportunities to benefit the marriage and their spouse’s efforts in the business.
Whether you are entitled to a portion of your spouse’s business largely depends on the categorization of the company as separate or marital property. If you are involved in a divorce where your spouse owns a business, you have to protect your financial interests. By working with an Asset Division Attorney in Orange County, CA, for your divorce, you can protect yourself during separation.
The state operates under community property laws. If spouses do not have a marital agreement that dictates the separation of assets, and cannot reach an agreement about their assets through mediation, their assets are subject to separation by the court. Under community property laws, all of a couple’s marital assets are split equally between spouses.
Marital or community assets are any assets obtained by either spouse throughout their marriage. Separate assets, or any assets gained prior to their marriage, are not divided between spouses.
There are some exceptions to these rules. Separate assets can become marital assets by:
Additionally, there are some assets obtained during a marriage that are considered separate property. These include:
However, even assets obtained with separate finances can be considered community property if the other spouse made financial contributions to it. The court assumes that all assets obtained during a marriage or in shared accounts are marital property unless one spouse has financial documents or other proof that shows otherwise.
When a spouse creates a business during a marriage, California considers it to be community property. This means that, if you are the spouse who does not own the business, you are legally entitled to half the business. This can make negotiations and litigation contentious for many couples.
There are several ways this equal ownership may be resolved, including:
Each of these options has different implications for both spouses, the business, their taxes, and other forms of financial support.
If a spouse creates a business prior to the marriage, many people may assume that it is considered separate property. This isn’t always true for businesses. Depending on when and how a business earned its value, it may be considered marital property. The business may be considered marital property if:
If the business grew during the marriage, the spouse who did not own the business will likely be entitled to part of the business’s profits. However, if the business’s value is largely found prior to a marriage and a spouse did not make significant contributions, the court may determine it to be a separate asset.
A: Assets in a California divorce are divided by community property laws. Each spouse has equal rights to marital property. Marital assets generally are any assets that a couple gained throughout their marriage. If the division of property is left to the court, the court will split assets equally between spouses, ignoring any factors outside a marriage. Couples can avoid a community property split by negotiating a separation agreement outside of court or creating a marital agreement before or during their marriage.
A: There is no timeframe that a marriage has to last for parties to have equal property rights. No matter when a couple divorces, each has equal rights to all marital assets. If the court must divide a couple’s property for them, they will do so in an equal 50-50 split. This only splits marital assets, not every asset in a divorce. Both parties will hold onto their separate assets, or assets gained prior to the marriage. The court does not have jurisdiction over separate assets.
A: If the separation of assets is under the court’s jurisdiction, it is always a 50-50 split of marital assets or as close as it can get to that. However, the division of property does not always have to be up to the court. There are two main ways to avoid this:
A: Separate assets are not split in a divorce. This includes:
Assets can also be protected through other methods, such as through a marital agreement or a trust established before a marriage.
A divorce involving a business is often significantly more complex, and it requires valuators and other professionals to negotiate an effective separation agreement. For a high-asset or complex divorce, contact Quinn & Dworakowski, LLP. We want to help you protect your financial interests during negotiation or in court.
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