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Is Business an Asset or Income During a Divorce?

On Behalf of | Jun 29, 2019 | Professional Practice & Business Ownership

Is business an asset or income during a divorce in North County or North County San Diego?  How do you disclose business ownership and what are the issues for each of the former spouses?

A business or professional practice is absolutely an asset during a divorce.  California is a community property state and all community property must be divided evenly.  Therefore, the two primary questions are:

  • What portion (if any) of the business is community property?
  • How much is the community’s interest in the business or professional practice (valuation) worth?

The question of whether part or all of the business ownership interest is community property or the separate property of the owner comes down to when the business interest was acquired and whether or not community funds or assets were used to support the business itself.  If the business or professional practice was formed or acquired during the course of the marriage the business ownership interest is community property and must be divided.  If the interest was acquired outside of the date of marriage and the Date of Separation, the business may be (at least in part) separate property.

If no community funds were ever utilized to support the business in any way the interest is probably the separate property of the owner.  If community funds or assets supported the business a complex analysis must be performed to determine the portion of the business which is to be considered a community asset.

Determining the value of the community’s interest in the business begins with a valuation of the business itself.  This is one of the most contentious issues (outside of child custody and parenting time) in a Carlsbad divorce.  The higher the value of the business or professional practice interest, the more the business owner must provide in offsetting compensation to the “community” to keep it.

There are several methods to determine the value of any business or professional practice.  Each strategy has pros and cons depending upon your perspective on the matter.  This is why it is important to work with the Certified Family Law Specialists at Burke & Domercq if you or your spouse own an interest in a business or professional practice.

Many people ask “is my business an asset or income during divorce?”  Learn more and protect your interests by contacting us or calling 760-389-3927 to schedule an appointment.

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