Puja Sachdev | May 8, 2025 | Divorce
Dividing property during a divorce is already challenging, but it becomes even more complicated when one or both spouses own a business. In San Diego, California, businesses can be considered community property, separate property, or a mix of both. That means your company—or your interest in it—could be part of what gets divided during a divorce.
This blog explains how business assets are treated under California’s divorce laws, especially in San Diego. We’ll also cover what steps you can take to protect your interests and how courts decide what happens to the business. Whether you’re a small business owner, a partner in a startup, or married to someone who owns a company, understanding these rules is essential.
For further guidance, readers can explore family law practice areas, read divorce planning blogs, or browse resource pages that explain asset division and property rights in more detail.
Community Property in California Divorce
California is a community property state, which means that most property acquired during the marriage is split equally between spouses in a divorce. That includes income, real estate, retirement accounts, and, in many cases, business interests.
However, not all business assets are automatically community property. The key is when and how the business was started or acquired.
- Community Property: If the business was started or acquired during the marriage, it’s usually considered community property.
- Separate Property: If the business was owned before the marriage, inherited, or received as a gift, it may be considered separate property.
- Mixed Property: If a separate business grew in value during the marriage, part of it may be community property.
This is where things get complicated, and it’s one reason why business division often leads to disputes in divorce cases.
How Do Courts Handle Business Asset Division?
When a divorce involves a business, the court needs to figure out:
- Is the business community, separate, or mixed property?
- How much is the business worth?
- How should the value be divided fairly?
To do this, the court may:
- Hire a business valuation expert to assess the company’s worth
- Look at financial records, tax filings, and market conditions
- Consider whether one spouse was more involved in running the business
Courts aim for a fair division of property, not necessarily a 50/50 split of each asset. One spouse may keep the business while the other receives other property of equal value.
Business Valuation Methods
Valuing a business isn’t simple. There are several methods that experts use, including:
- Income-Based Valuation: Looks at how much money the business makes
- Asset-Based Valuation: Based on the value of equipment, property, and inventory
- Market-Based Valuation: Compares your business to similar businesses recently sold
Which method is used depends on the type of business, how stable it is, and how much financial documentation is available.
If you’re facing divorce in San Diego and want to learn more about how business valuation works, legal blogs and professional resource pages often explain the process with real examples.
What if the Business Was Owned Before Marriage?
A business started before marriage is typically separate property, but that doesn’t always mean it’s safe from division. If the business grew during the marriage or used marital funds or labor, part of its increased value could become community property.
California courts use formulas like Pereira or Van Camp to figure out how much of the business growth should be shared. These formulas account for effort, investment, and other contributions during the marriage.
If you’re wondering whether your business will be divided or protected, it’s helpful to read legal resources that explain how these formulas work in California divorce law.
Can a Prenuptial Agreement Help?
Yes. A prenuptial agreement or postnuptial agreement can help protect a business in case of divorce. These documents can outline:
- Whether the business is separate or community property
- How to handle income from the business
- What will happen to the business value if the marriage ends
In San Diego, courts generally honor valid prenups. If you’re a business owner, a well-written agreement can save you time, money, and stress later on.
Explore articles or practice pages focused on prenuptial planning for more detailed information about how to protect business assets before and during marriage.
What if Both Spouses Work In the Business?
If both spouses helped run the business, the court may need to decide who continues to operate it. In some cases:
- One spouse buys out the other’s share
- The business is sold, and the proceeds are split
- The spouses co-own the business, though this is rare after divorce
The court will consider what’s best for the business, the couple, and any children involved. Documentation of each spouse’s role can be helpful during this process.
Practice area pages on business division or family business disputes often provide helpful guidance on these scenarios.
Tips To Protect Your Business in Divorce
If you’re a business owner in San Diego considering divorce, here are some smart steps to protect your interests:
- Get Organized: Gather business records, contracts, and financial statements
- Hire a Valuation Expert: Get a fair and accurate assessment of the company
- Avoid Mixing Personal and Business Finances: Keep everything clearly separate
- Speak With an Attorney: Talk to a family law attorney who understands business division
Planning ahead can save time and money—and may help you keep control of the business you’ve worked hard to build.
Dividing Business Assets in a San Diego Divorce
Dividing business assets during divorce can be complex, but understanding how California law treats these issues is the first step toward protecting your financial future. Whether your business is community, separate, or mixed property, it’s important to know how valuation works and what the court will consider.
Each divorce case is unique, and the right outcome depends on your situation, your documents, and your goals. If you’re preparing for divorce in San Diego and want to better understand your options, take time to explore legal blogs, practice area pages about high-asset divorce, or resources that explain business division in California family law.
Contact Our Divorce Law Firm in San Diego, CA. Call us at (619) 866-3756
Contact our experienced San Diego divorce lawyers at San Diego Divorce Lawyers, APC, today for legal assistance. Contact us at (619) 866-3756 to schedule a consultation.
We proudly serve throughout San Diego County. We are located in San Diego, California.
San Diego Divorce Lawyers, APC
2851 Camino del Rio S #430
San Diego, CA 92108
(619) 866-3756
