Technically, married couples share their resources and financial obligations. However, people are often unsure of where the marital estate begins and where personal property actually ends. Spouses married to successful business owners often assume that they have no interest in the business, but they may be wrong.
Maybe their spouse already owned the company when they got married, or perhaps they have never worked full-time since getting married. Contrary to what stay-at-home spouses sometimes assume, they may have a partial interest in the business owned by a spouse. Whether it is a small company or a professional practice, they may have a right to some of the company’s value when they divorce.
Community property rules apply to companies
The idea of community property is relatively simple. Both spouses have an interest in the property that the other acquired during the marriage. They both share the income earned during the marriage. Those rules apply even in cases where one spouse works and the other does not.
A stay-at-home spouse has an interest in any assets and income acquired during the marital relationship. Even in scenarios where the business might seem like separate property, it may not actually be separate property. Maybe one spouse inherited the business from a family member or had already started the company before getting married.
Those scenarios might make the business seem like separate property. Still, commingling has likely occurred. The business owner spouse has likely reinvested substantially in the company during the marriage. The use of marital income to improve or preserve separate property may give the other spouse a partial interest in the business.
Any unpaid work performed by the non-owner spouse could also serve to strengthen claims of commingling. Whether they cleaned company offices on the weekends or answered phones when the usual receptionist was unavailable, their contributions to the company can lead to claims of commingling when they divorce.
Even in cases where there might be a marital agreement declaring the business separate property, unconscionable contract terms or a lack of representation could compromise the enforceability of a prenuptial agreement. While a stay-at-home spouse may not want to run the business, securing some of its equity could help them prepare to live independently.
Those preparing for divorce as stay-at-home spouses often need help establishing a foundation for the future. Learning about the rules that govern complex property division cases can be beneficial. Community property rules make it feasible for non-working spouses to share in the wealth accumulated during a marriage even if they did not earn income directly.