1. A Business Is an Asset
Though the spouse who owns the business may feel proprietary over it, a business is an asset. And because it is an asset there must be a determination of whether it is separate or community property, or a combination of the two, and a valuation of the business. However, these determinations are not easy to make.
2. What Type of Business Is This
A community business is one that is started during the marriage.
A separate property business is generally one that is started before the marriage or a business started during the marriage with separate property funds. This may have a community interest, but is separate property.
If a spouse establishes or acquires a business with separate funds, there will need to be a tracing in order to apportion the separate property and community property interests. If the party making a separate property claim cannot perform an adequate tracing, the business investment will be presumed to be entirely community property. Note that any increase in the value of a business or profession attributable to community skills, efforts, or industry is community property.
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