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Doing Business with Your Spouse During Divorce in California

Can I Do Business With My Spouse During Divorce In California?

The short answer is "Yes," but there are several reasons to proceed with caution before operating a California  business with your soon-to-be divorced spouse.  These include:

  • Transactions that favor one spouse: If one spouse completes a business transaction that is disadvantageous to one party, then the disadvantaged party can ask the court to cancel the transaction, arguing that one spouse took unfair advantage of the other.
  • Transaction that involve community property: If your business transaction involves community property, then there are some special rules governing it.  It is important to remember that the question of community property can involve complex forensic accounting, so you may not always be certain whether the court will find that a particular piece of property is separate or community property.
  • Emotional Issues: both spouses often have strong emotional feelings during the divorce process, so it is sometimes hard for people to behave objectively and professionally.

Can I Run a Business that Competes With My Spouse's Business While We are Getting a Divorce?

The spouses can run competing California businesses while divorcing if:

  • each spouse's business is separately owned, and
  • the transactions are not between the spouses personally

However, if one spouse uses the marriage relationship to gain an unfair business advantage, the disadvantaged spouse may be able to sue for damages in addition to the divorce settlement.

Because a community owned business is considered by California law to be like a business partnership, a spouse cannot directly compete with it.  For example, if there is a business opportunity which is available both to the community owned business and to the separately owned business, the spouse who owns the separate business cannot take advantage of the opportunity without offering it to the community owned business first.

Should I Contact a Family Lawyer Before Transacting Business During Our Divorce?

An experienced family lawyer can reduce the stress and complexity of a divorce and make sure that you exercise your legal rights.  If necessary, a family lawyer can also represent you in court.  Because it is difficult for couples getting divorced to be objective, it is a good idea to seek legal counsel to be sure you make the right financial decisions.

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