3 Things Business Owners Need to Know During Divorce in California
When a business owner goes through a divorce, the financial stakes — and the complexity — often increase dramatically. Business interests aren't just assets; they often represent years of work, significant investments, and a major part of your financial future.
In California divorces, business ownership often becomes a major point of dispute. Disputes over ownership, valuation, and income are common, and mishandling these issues can lead to serious financial consequences.
If you own a business and are facing divorce in California, you need more than basic legal advice — you need a strategic plan tailored to complex financial realities.
In this post, we’ll cover three key things business owners need to know when facing divorce — and how to protect yourself, your company, and your long-term interests.
1. Your Business May Be Considered Community Property
In California, any asset acquired or significantly developed during the marriage is generally considered community property or having a community property component — meaning both spouses may have a claim to it.
Even if you started your business before marriage, its increase in value during the marriage could have a community property component if your personal effort contributed to that growth.
Key points to understand:
Business entities like LLCs, partnerships, corporations, and sole proprietorships are all considered.
Active efforts during marriage can create a community interest, even if the business started before marriage.
Artificially depressing the value of your business or transferring business assets without proper disclosure can trigger serious legal penalties under California's fiduciary duty laws.
A premarital agreement can be a very effective way to protect a business.
Protecting yourself starts with understanding that your business could be on the table — and approaching disclosure and valuation carefully and honestly.
2. You Must Provide Full and Honest Business Records
California law requires full, accurate, and transparent financial disclosures during divorce — including business interests.
In addition to the basic financial disclosure forms, your spouse has the right to request additional documentation, such as:
Business tax returns
Profit and loss statements
Balance sheets
Partnership or operating agreements
Records of transactions, contracts, and payments
Third-party discovery — including subpoenas to accountants, business partners, and financial institutions — may also be used if voluntary disclosure is incomplete or suspicious. To hedge against the risk of exorbitant attorney and other professional fees, and drawing your team into the fight, it can help if the attorneys can develop a negotiated list of records and information to produce without formal subpoenas. This will only work if the client is on board with the strategy, and if the strategy makes sense for the specific case.
Trying to hide business income or undervalue your company is not only illegal but highly risky:
You may lose credibility with the court.
The court may impose financial penalties or award a greater award to your spouse than it otherwise would have.
Your legal costs will skyrocket if the document and records exchange is not carefully managed.
Hurts the potential of reaching a negotiated settlement.
Bottom line, full transparency isn't just a legal requirement — it’s typically a smart strategy in a California divorce to protect your business.
3. Hiring a Business Valuation Expert Can Strengthen Your Position
In almost every divorce involving business interests, having the right financial experts is crucial.
Specifically, you may need:
A business valuation expert to determine the fair market value of your company
A forensic accountant to assess income streams and investigate any disputes about hidden value
Why it matters:
Spouses who are not actively involved in the business often overestimate its value, while the business-owning spouse may sometimes underestimate it.
Judges and many attorneys are not business valuation experts — they rely heavily on credible expert reports. Having a solid report at the beginning of the case can help expedite settlement.
Without a professional valuation, you may waste time arguing without solid evidence or practical solutions.
Accountants and experts may represent a more objective seeming opinion.
Having a respected expert on your side helps:
Anchor negotiations in facts rather than emotion
Show the court you're acting transparently and professionally
Strengthen your position if litigation becomes necessary
Preparing for a strong negotiation — and being ready to litigate if needed — puts you in the best position to protect your business and financial future.
An experienced Los Angeles divorce attorney should have referrals to the experts you need.
Key Takeaways: Divorce for Business Owners in California
Even if you started your business before marriage, some or all of its value may be subject to division.
Full disclosure of business records is mandatory — and attempting to hide income or assets can severely backfire.
Hiring qualified business valuation and other financial experts early can significantly strengthen your negotiating position.
Acting strategically, transparently, and proactively is essential to protecting both your company and your personal financial security.
Final Thoughts
Our firm focuses on helping business owners, entrepreneurs, and professionals protect what they've built and navigate high-asset divorces with clarity, strategy, and strength.
Curious how people try to hide money in divorce and why it usually backfires? Read our guide.
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Emily Rubenstein Law PC is a full service divorce and family law firm. We proudly serve Beverly Hills, West Hollywood, West Los Angeles, Santa Monica, Culver City, the South Bay, Glendale, Pasadena, Sherman Oaks, Studio City, Encino and all of Los Angeles County.
Give us a call or check out our website:
(310) 750-0827 | www.emilyrubensteinlaw.com
On your side,
Emily Rubenstein, Esq.
Founding attorney
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