California Divorce Law...

If the business was started during the marriage, all the value created during the marriage is community property. But when one spouse started the business before the marriage, the value of the business has three pieces:

• The value of the business at the date of marriage, which is separate property.
• Increase in value due to return on capital, which is also separate property.
• Increase in value due to labor or community contributions, which is community property.

It looks straightforward at first. But how do you figure out how much of the appreciation is due to return on capital and how much is due to labor or community contributions?

The answer is as much art as science. Where it appears that the hard work of the parties was the most important factor, then courts will tend to give a minimum "return on capital" (such as the government bond rate), and say the rest was due to community labor. Otherwise, the courts will tend to give a reasonable wage for time invested and say the rest was return on capital.

Click here for some examples.

Email this page on to a friend.

Disclaimer: We are not giving legal advice. No warranties. We disclaim all legal liability. More...

Click here to go to top California divorce law page.

Click here for the California divorce legal table of contents.