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

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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.