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Will I lose my business during a divorce?

On Behalf of | Jan 24, 2022 | divorce

Running a business is a rewarding endeavor, but there are some life challenges that can make doing so difficult. For example, going through a divorce could jeopardize how you run your business. One of the most important things you need to figure out at the start of the divorce process is whether your business is a separate or marital asset.

All divorcing couples in California must divide up their marital assets. Marital assets are those that both spouses jointly own together. Separate assets are an individual’s personal property and are therefore not included in property division.

Is my business marital property?

There are many factors that go into determining whether your business is marital or separate property. This can be confusing though, as some assets that start out as separate can actually make the switch to marital. If you are unsure, consider some of the following:

  • When you created your business — If it was prior to your marriage, it might still be separate property. If it was after, it might be marital.
  • Whether your spouse played a role in the business — If he or she did, your business could be marital property regardless of when you started it.
  • The presence of a prenuptial agreement — A prenup might clarify whether your business is your separate asset regardless of your spouse’s involvement.

California is a community property state. What this means is that outside of a few exceptions, all assets acquired during your marriage qualify as marital assets. This is why it is so important to correctly determine when you started your business.

How can a prenuptial agreement help?

Since the line between separate and marital property can sometimes be blurred, you might want to consider getting a prenuptial agreement. This agreement can clearly state that your business is your own separate property and will not be up for division during divorce. If you started your business after saying “I do,” you can use a postnuptial agreement to protect your same business interests.

Going through divorce as a business owner is challenging. While you are trying to maintain normal operations within your business, you are also dealing with the legal, financial and emotional upheaval of a divorce. Protecting yourself and your business in such a situation can be overwhelming, but most find that it is easier to navigate when they have adequate support and assistance throughout the process.