Effective And Affordable Solutions
  1. Home
  2.  » 
  3. Divorce
  4.  » Is a business considered community property in a divorce?

Is a business considered community property in a divorce?

On Behalf of | Oct 26, 2022 | Divorce

Arizona courts follow community property laws when dividing up property in a divorce. This essentially means that any asset classified as a marital or community property will be equally divided between both spouses. While this is often a straightforward process, there are some assets that are more difficult to classify and distribute.

Dividing up a business in a divorce

Dividing up business ownership interests and business proceeds in a divorce can be especially complicated, as it is often unclear whether it is marital or separate property.

Business ownership interests

When it comes to business ownership interests, if a business is formed during the marriage, it is likely that the ownership interests will be classified as community property and be divided equally between the spouses, even if only one spouse has ownership interest in the business. This can cause problems for the business owner, as they may now be forced to share control of the business with their ex-spouse.

To avoid this complication, married couple can enter an agreement to clearly indicate that the business ownership interests are “separate” property and, therefore, will not be divided equally in the event of a divorce.

Business proceeds

Even if business ownership interests are classified as separate property, business proceeds could be classified as community property if the non-owner spouse contributed to the business financially or otherwise. For example, business proceeds may be community property if the business pays the owner spouse a salary or if marital funds are used to support the business.

If you are a business owner in Arizona, you know the hard work and financial investment required to build a business from the ground up. A family law attorney can help you value your business and establish that your business should be classified as separate property.