Domestic partnerships in California have the same rights and responsibilities as married couples. This includes how courts will divide your property if you end your partnership. The state follows community property laws, which means you and your partner will typically split your shared assets equally when you separate.
When you own a business, the process can become more complex. The court will usually see your business as separate property if you started it before registering your partnership. However, if your business grew in value during your partnership, they may consider this growth as community property.
How does it work?
The original value of your business usually remains your separate property. However, courts may look at various factors to decide whether and how much of your business growth qualifies as community property:
- Your work during the partnership: If you’ve put significant time and effort into growing your business during the partnership, courts might see this growth as partly community property.
- Your partner’s contributions: Even if your partner doesn’t directly work in your business, their support – like managing the household – could count as helping your business grow.
- Use of shared resources: If you used joint funds or assets to support or expand your business, this could make some of its value community property.
If you have a partnership agreement about your business, courts will usually honor it unless it’s clearly unfair. However, without one, these factors could affect how much of your business growth you might need to share if your partnership ends.
What happens if your business has community interest?
The court will usually apportion the value between separate and community property. This means they will decide which portion of the business’s value is what you owned before the partnership and what was the growth during the partnership. They will then divide only the community property portion between you and your partner.
In some cases, the court may allow you to buy out your partner’s interest. This option lets you keep full ownership of your business by paying your partner for their share of the business growth.
Your business is more than just an asset
It is the result of years of hard work and dedication. If you’re unsure how a domestic partnership dissolution might affect your business, it’s time to seek advice from an attorney.
