How California Divorce Law Treats Business Assets

Dividing business assets during a divorce is often one of the most complicated and contentious issues. If you own a business and are going through a divorce in California, you may be wondering: Will my business be considered community property? How will the court determine what portion of it belongs to me? California courts use two primary methods to analyze business assets in divorce cases—the Van Camp and Pereira approaches. According to Sven Buncher of The Bunchew Corporation,

“The idea behind a Van Camp case is that you have a business that is not making money because of your personal services, but because of other things that were set up. It could be a large amount of assets that are producing income. If you didn’t go to work on a particular day, it’s still producing money. And basically that means that you’ve created an entity before marriage that’s making money.”

The Van Camp Method: When Business Growth Is Independent of Your Efforts

The Van Camp approach is used when a business generates revenue not because of the owner’s direct labor, but due to factors such as existing assets, investments, or employees. This is often applied when:

The business existed before the marriage and continued generating income through passive growth.
The business has multiple employees and runs independently of the owner’s day-to-day work.
The increase in value is due to economic conditions or market forces, rather than the owner’s efforts.

In this scenario, the community property share is limited to fair compensation for the spouse’s efforts during the marriage, but the remaining business value remains separate property.

The Pereira Method: When Business Growth Is Based on Personal Effort

The Pereira approach applies when the business’s growth is largely due to the owner’s labor, expertise, or skills. This is often the case when:

The business is a professional service, such as a law firm, medical practice, or artistic career.
The owner’s direct efforts, reputation, or skillset significantly contribute to the business’s success.
The increase in business value is directly linked to the owner’s work during the marriage.

“Now, if you have a different kind of business where it’s mostly based upon your personal services—let’s say you’re an artist and really all the production is you making the artwork—well, at that point, most of what you produced during marriage is as a result of your labors.”

Under the Pereira approach, the court will allocate a larger community property share to reflect the spouse’s direct contributions during the marriage.

What Business Owners Should Ask Their Attorney

If you own a business and are facing a divorce, consider asking your attorney:

Will my business be evaluated under Van Camp or Pereira?
How much of my business value is considered separate property?
What documentation should I provide to demonstrate my business’s financial history?
How can I ensure fair compensation while protecting my ownership stake?
Are there legal strategies to safeguard my business from division?

Protecting Your Business in Divorce

Understanding how California courts determine business ownership in divorce is crucial to protecting your financial future. Whether your business falls under Van Camp or Pereira, proper legal guidance can help you navigate these complex laws.

At Buncher Law Corporation, we specialize in high-asset divorces and business valuations. If you’re facing a divorce and want to protect your business, contact us today to schedule a consultation.