Your rights to the business that you owned prior to marriage but worked at during marriage would depend on a few different factors, as explained below, but you do have rights!

In California, the courts apply different formulas to deal with the distribution of property and assets that the couple owned during their marriage. In some divorce cases, the court will have to deal with not only splitting up the property such as the home or savings accounts but businesses owned and worked at during the marriage. In situations where the business was bought during the course of the marriage the usual rule is that it is community property if it was purchased with community money, and will then be divided evenly between the two parties. For situations where there are businesses owned by one of the spouses prior to marriage, the court uses two different formulas depending on the nature of the business.

When the business that was purchased before the marriage increased in value during the marriage due to the spouse’s skills that worked there the courts use a formula from a case named Perierra. In this situation, the court will look at the value of the business at the time it was purchased prior to the marriage and award the spouse that worked at the business what they call a “reasonable rate of return” on the business. This basically means that for every year of marriage the spouse worked at the business they are entitled to 10% of the original purchase price of the business. So if the parties were married for 10 years the spouse that worked at and owned the business prior to the marriage is entitled to 10% of the original purchase price 10 times, one time for each year they worked at the business during the marriage. The remaining earnings and interest in the business is property of the community then is to be divided equally between the parties.

When the business that was purchased before the marriage took place increased in value during the marriage due to the sheer nature of the type of business or the services that it performed the courts use a formula from a case name Van Camp. In this situation, the court will look at the fair value that the spouse would’ve earned working at the business during the years and marriage and offset that amount with how much money the spouse actually took home as earnings each year. For example if the spouse’s work during one year of marriage was worth $30,000 but they spouse only took home $15,000 the community would still be owed $15,000 of earnings for that year. The court would then award that offset amount, $15,000 in the example above, to the community and the rest of the income and the business would be the property of the spouse who purchased it prior to marriage and worked at it during marriage.

In order to protect your rights and your separate property business it is important for you to hire a divorce lawyer that is responsive, reliable, and experienced in family law so you can obtain the best results possible on these complex and difficult issues. The Law Offices of Michael S. Carrillo has a great deal of experience in divorce cases and will handle your case with the greatest care. Contact our office immediately for a free consultation at (626) 799-9375.