How Premarital Agreements Can Protect Your Business in a California Divorce
If you’re a business owner in California, getting married without a premarital agreement can expose your company to serious risk in the event of divorce.
California is a community property state, which generally means that assets acquired during marriage — including businesses or business value — can be subject to division. Even if you started your business before the marriage, its growth during the relationship may be considered partly community property.
Fortunately, a well-drafted premarital agreement (often called a “prenup”) can offer powerful protection.
In this post, we’ll break down how premarital agreements work, what they can protect, and why they’re a critical tool for business owners entering marriage in California.
Why Your Business May Be at Risk Without a Prenup
Even if your business is technically “separate property,” California law allows for community property claims when:
The business grows in value during the marriage
You invest time, effort, or marital resources into the business
Your spouse contributes to the business (financially or otherwise)
Community income is used to invest in the business
In a divorce, your spouse may claim a share of the increased value — and you may be required to buy out that interest, liquidate part of your business, or give up other valuable assets in exchange. Business partners, employees, and your financial professionals may be called to testify in court or be questioned under oath a deposition. Sound pretty horrible? There’s a different path. Prenups are the opportunity to customize the rules that govern the community vs. separate characterization of your business and can help avoid most, sometimes all, of this mess.
A prenup gives you the power to avoid these outcomes entirely. You can:
Specify that the business remains 100% your separate property, regardless of future growth
Clarify that the other party waives any interest in the business (including appreciation, income, or control)
Or — if full separation doesn’t feel right for your relationship — you can build in a customized, administrable buyout structure that reflects fairness but avoids litigation. This might include:
A fixed formula or percentage payout
Clear valuation method (to avoid battling over business value later)
Payment terms that won’t disrupt your operations or cash flow
These provisions can dramatically reduce the risk of future conflict — and make settlement faster, less contentious (read: less expensive), and far less painful.
Why Business Valuation in Divorce Is a Nightmare— and How the Right Prenup Can Help You Avoid It
Without a prenup in place containing the right provisions, divorcing business owners often find themselves stuck in one of the most frustrating and expensive parts of litigation: business valuation.
Valuing a business for divorce isn’t like pulling a Zillow estimate or obtaining a real estate appraisal — it requires detailed analysis, significant document production and testimony, competing experts, and subjective assumptions. The result? It’s time-consuming, high-stakes, and often highly contentious.
Why business valuation during divorce is so difficult:
Different experts often assign different values depending on the method used (fair market value vs. book value vs. income approach). It is not possible to predict which approach a judge will find most fair in a divorce.
Many businesses — especially service-based companies or creative ventures — are tied closely to the owner’s personal efforts, which complicates the analysis.
Future income and goodwill are speculative and difficult to agree on.
Opposing parties may accuse each other of overvaluing or undervaluing the business to gain a financial advantage. This can include auditing business expenses and perquisites.
And the cost?
It’s not uncommon for each side to spend tens of thousands, if not hundreds of thousands, of dollars hiring forensic accountants, valuation experts, and attorneys just to fight over numbers that are, ultimately, negotiable.
A well-drafted prenup can help you avoid this.
By clearly stating whether your business will remain separate property and how future growth or income will be handled, you can bypass costly valuation fights altogether — and preserve more of your energy, resources, and focus for your life and your business.
How a Prenuptial Agreement Can Protect Your Business
A prenuptial agreement is a legally binding contract entered into before marriage that sets the terms for how property, income, and debt will be handled in the event of divorce.
Here’s how it can help protect your business:
1. Confirm the Business as Separate Property
A prenup can clearly state that your business — and any increase in its value — will remain your separate property, regardless of when or how the growth occurs. Or, a prenup can contain buy out structures that are more administrable than what standard California la provides,
2. Control Future Appreciation
You can agree in advance that any increase in the business’s value during the marriage belongs solely to the business-owning spouse, avoiding future valuation battles.
3. Clarify Spousal Support Expectations
If your business income is substantial, a prenup can define or limit spousal support obligations, subject to certain requirements under California law.
4. Protect IP, Brand Rights, and Control
For entrepreneurs, founders, and creative professionals, your company’s intellectual property and brand identity may be just as valuable as its financials. A prenup can help ensure that your spouse does not gain ownership or control of these assets during divorce.
5. Prevent Disputes Over Contributions
A prenup can clarify that even if your spouse works for the business or supports it indirectly, those efforts do not create a financial interest unless explicitly agreed upon.
What Can’t a Prenup Do?
While prenups are powerful, they aren’t unlimited. In California, prenuptial agreements:
Cannot waive child support
Must be entered into voluntarily, without duress
Require full financial disclosure from both parties
Must comply with the timing requirements per California law.
That’s why working with an experienced family law attorney is critical to ensure your prenup is enforceable — and tailored to your specific business and personal goals.
When Should Business Owners Consider a Prenup?
Ideally, you should start the prenup process at least 3–6 months before the wedding. This gives both parties time to review, negotiate, and consult with their own attorneys — and helps prevent claims of coercion or unfairness.
You should especially consider a prenup if:
You own all or part of a business, startup, or professional practice
You have valuable intellectual property, brand rights, or licensing deals
You expect future income tied to business growth or equity
You have business partners or investors who would be affected by a divorce
Key Takeaways: Using a Prenup to Protect Your Business
In California, business interests can be partially divided in divorce without a prenup — even if started before marriage.
A properly drafted prenuptial agreement can protect the business’s value, future appreciation, IP, and control.
Prenups can clarify spousal support expectations and prevent costly litigation over business valuation or contributions.
Start early, be transparent, and work with experienced legal counsel on both sides.
Final Thoughts
If you’re a business owner in Los Angeles, a premarital agreement isn’t just a legal document — it’s a strategic investment in your future stability.
At our Los Angeles family law firm, we focus on working with entrepreneurs, professionals, and creatives to craft enforceable, customized prenups that protect what they’ve built.
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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