Increase in business value during your marriage

Suppose you started a business before marriage. While married, you work in the business and use the profits to pay your family's living expenses.

When you divorce, does your soon to be ex, get a portion of your business? Probably.

So what do they get?

The courts in California have come up with two methods to determine the split of your business and it depends on the type of business you own.

The first method is used where you have a capital intensive business, a business that has increased during marriage primarily due to factors other than the skill or hard work of the owner.

Using this method, as long as the couple was adequately compensated by the business during marriage, the increase in the value of the business belongs to the separate property estate of the owner-spouse.

The other method is used when dealing with a labor-intensive business. Here, the owner-spouse is given a fair return on the value of the business at the time of marriage.

The balance of any increase in value during marriage is allocated to the community property.