Can I Protect My Business If I Start It During Marriage?

Short answer: Yes, but not automatically.

In California, anything acquired during marriage, including a business, is generally presumed to be community property. That means your spouse could be entitled to a share of its value in a divorce, even if they never worked in the business or contributed directly.

If you want to protect a business you are starting or growing during marriage, you need to take specific legal steps. Here’s how it works.

What Happens by Default in California?

California is a community property state. Without a written agreement to the contrary, most assets and income acquired during marriage are considered jointly owned. That includes:

• Business revenue and profits

• Appreciation in value, even if funded with separate property

• Brand goodwill and intellectual property

• Any asset built with effort during the marriage

If you divorce, the court may divide the business value 50/50 unless you have opted out of the default rules in writing.

How Do I Keep a Business Separate?

To maintain a business as separate property, you and your spouse must agree in writing. The three main options are:

1. Prenuptial Agreement

A prenup signed before marriage can state that any future business or business growth will remain your separate property.

2. Postnuptial Agreement

If you’re already married, a postnup can accomplish the same thing. These agreements are enforceable but face more scrutiny, so both parties will need to make full financial disclosures and have independent legal counsel.

3. Transmutation Agreement

This is a post-marital contract that changes the legal character of an asset. It only works if it meets the specific requirements of California Family Code Section 852.

Without one of these agreements, your business may be subject to division under California’s default rules.

What If I Use Separate Funds to Start the Business?

If you use premarital savings or a gift from your family to fund the startup, you may be entitled to reimbursement under Family Code Section 2640. But reimbursement only applies to your original investment. It does not protect the business’s income or appreciation. Without a written agreement, any growth is still likely to be treated as community property.

What If My Spouse Helps with the Business?

Even informal help from a spouse, such as administrative support, advice, or simply covering household expenses while you build, can strengthen their claim to a share of the business.

California courts often use formulas like Van Camp and Pereira to divide business value when there is both separate and community involvement. These cases can be expensive to litigate and difficult to predict

The Bottom Line

If you’re starting a business during marriage, do not assume it is protected just because it is in your name or funded with separate money.

A written agreement is the only reliable way to protect your interest and set clear expectations around income, risk, and ownership.

Want to talk through your options?

If you’re building a business and want clarity around how to protect it, I can help. I draft agreements that reflect the realities of your life and the nuances of California law.

25 Creative Clauses You Can Include in a Prenup

Most people think prenups are just about protecting separate property or waiving spousal support. But a thoughtful, personalized prenup can do much more. Here are some creative ideas for a premarital agreement.

·       - Delay the start of community income until a specific event (e.g., birth of a child or 5-year anniversary).

·       - Define what happens if one partner contributes separate funds to a shared home—including reimbursement and appreciation.

·       - Specify how future real estate purchases will be titled and managed.

·       - Treat stock options, RSUs, or startup equity earned during marriage as separate or shared.

·       - Include required notice or consent for major financial transactions above a certain threshold.

·       - Mandate that spouses remain named beneficiaries on life insurance or retirement accounts.

·       - Require annual financial check-ins or account disclosures.

·       - Carve out how inheritances will be treated, including whether use in joint accounts alters their character.

·       - Designate how business ownership and growth will be treated—whether formed before or during marriage.

·       - Create a plan for how to handle one spouse supporting the other through grad school or career transitions.

·       - Include compensation or reimbursement for unpaid labor (child-rearing, working in a family business, etc.).

·       - Allow for automatic updates to certain terms after major life events (e.g., having children, buying a home).

·       - Create tiers of spousal support based on length of marriage or specific circumstances.

·       - Waive spousal support under normal circumstances, but allow exceptions for disability or stay-at-home parenting.

·       - Require mediation or collaborative law before filing for divorce.

·       - Create rules around charitable giving or financial support for extended family.

·       - Outline whether gifts exchanged during marriage become community or remain separate.

·       - Agree to joint or separate tax filing and how liabilities/refunds will be divided.

·       - Require written agreement for significant credit card debt or new loans.

·       - Include an expiration date for the prenup or certain provisions (e.g., after 10 or 20 years).

·       - Set rules for retirement savings—whether contributions are joint or separate.

·       - Require continued financial support for a non-earning spouse in the event of disability or illness.

·       - Specify expectations and protections related to fertility treatments or surrogacy costs.

·       - Include values-based clauses that reflect your shared goals and commitments (like financial transparency or mutual respect).

Here’s a history of title presumptions and separate property contributions under California law, leading to the enactment of Family Code § 2640:

Pre-1975: Title Controlled Character

Property titled in a married woman’s name alone was presumed to be her separate property (Civil Code § 5110).

Courts relied heavily on title form to determine character, often disregarding actual intent or source of funds.

1965–1980: The Lucas Era

Spouses often took title as joint tenants or in both names, even when one used separate property.

In Marriage of Lucas (1980), the court held that taking joint title created a presumption of a gift of separate property to the community.

This meant no reimbursement at divorce without a prior written agreement stating otherwise.

1984–1985: Legislative Response

The Legislature responded to Lucas by enacting Civil Code § 4800.2 (now Family Code § 2640), effective 1985.

This gave a spouse the right to be reimbursed for separate property contributions to community real property, unless there is a written waiver.

Reimbursement applies to down payments, principal payments, and improvements, but not interest or appreciation.

Reimbursement must be traced to a separate property source.

Post-1985: Form of Title is Not Dispositive

Title no longer controls the character of marital property.

Reimbursement rights under § 2640 are preserved regardless of how title is held, unless expressly waived.

Modern practice focuses on tracing funds and documenting intent, rather than relying on the deed alone.

When Is It Really Over? Understanding Date of Separation in California Divorce

In California, the “date of separation” matters. It marks the point when new income, retirement contributions, and other assets stop being considered community property. But figuring out that date isn’t always straightforward.

Under California law, separation happens when one spouse decides the marriage is over and their actions make it clear that the break is complete and final.

But what if they broke up and got back together?

A past period of separation doesn’t necessarily mean the marriage was over. If the couple later resumed their relationship—by living together, showing affection, or continuing to share finances—the law often sees that as a reconciliation. That resets the clock.

Even if spouses live apart for years, they may not be legally separated if they still function like a couple in meaningful ways.

It’s about conduct, not just distance

Living in separate homes, or even filing for divorce, doesn’t always mean the marriage has ended. If the parties still spend time together, travel as a family, exchange gifts or messages of affection, or stay sexually involved, the law may find that the marriage continued despite the physical distance.

What counts as reconciliation?

Reconciliation isn’t just about moving back in or sleeping together. It requires mutual intent to fully restore the marriage, along with conduct that reflects that—such as shared finances, social presentation as a couple, or returning to marital roles.

Cohabiting for practical reasons (like parenting or finances) doesn’t automatically undo a separation, but it raises questions. Courts look at the totality of the circumstances, not just one factor.

The Bottom Line

Temporary separations—even long ones—don’t necessarily end a marriage. To be legally separated in California, there has to be a final and complete break, both in words and in actions. And if a couple reconciles after a separation, the legal date of separation likely moves forward to when the final break actually occurred.

If you’re navigating this question in your own divorce, it’s worth talking with a family law attorney to assess how your history may affect your rights.

Splitting Assets in a California Divorce: What You Need to Know

Dividing property during divorce can feel overwhelming, especially when you’re already navigating the emotional toll of separation. California’s community property rules provide a clear framework—but how those rules apply in real life can have major financial consequences.

Below is a practical overview of how assets are divided in California divorces and what to look out for.

What Counts as Community Property?

Community property includes anything acquired during the marriage using income earned during the marriage. It doesn’t matter whose name is on the title, deed, or account.

Examples:

• Homes or real estate purchased during the marriage

• Retirement accounts (401(k)s, pensions) contributed to during the marriage

• Income, bonuses, and stock options earned during the marriage

• Vehicles, bank accounts, investment accounts

• Business interests developed during the marriage

What Is Separate Property?

Separate property belongs to one spouse and is generally not divided in divorce—unless it has been commingled or transmuted.

Examples:

• Anything you owned before marriage

• Inheritances or gifts made to you alone

• Property acquired after the date of separation

• Passive income from separate property (if not commingled)

• Personal injury settlements (with exceptions)

Note: If separate and community property are mixed without documentation, or if you change the character of the asset, it may be treated as community property.

How Are Community Assets Divided?

California law presumes an equal division of community property, but this doesn’t mean splitting everything 50/50 down the middle. Division is based on total value, not identical assets.

Common methods:

• In-kind division: Both spouses get equal portions of accounts or assets

• Offset: One person keeps the house, the other gets investments or retirement to balance it

• Buyout: One spouse pays the other for their share of an asset

• Sell and split: The asset is sold and the proceeds are divided

When Is Division Not 50/50?

While equal division is the default, the following may justify an unequal split:

• A valid prenuptial or postnuptial agreement

• A negotiated settlement agreement

• Breach of fiduciary duty, hiding assets, or financial misconduct

• Reimbursement claims for separate property used for community benefit

• Tax impacts of dividing assets

• Business ownership, where one spouse continues to operate the business

What Happens to a Business?

If one spouse owns a business, any increase in value during the marriage may be partially community property. Business valuation often requires a forensic accountant. Courts may assign the business to the spouse who runs it and give the other an offset or a buyout.

What About Debt?

Like assets, debts are categorized as community or separate:

• Community debt: Typically includes credit card balances, loans, or mortgages incurred during the marriage

• Separate debt: Usually includes debts from before the marriage or after separation

Reimbursement claims may arise if marital funds were used to pay separate debts—or vice versa.

How to Protect Your Financial Interests

• Get organized: Collect bank statements, deeds, and account info

• Clarify ownership: Identify what’s separate and what’s community

• Avoid premature changes: Don’t retitle property or change beneficiaries without legal advice

• Value your assets: Use qualified experts when needed

• Plan for taxes: Understand tax implications of asset division and support payments

Whether you’re considering divorce or just want to be prepared, understanding the rules can help you make better decisions now and avoid conflict later.