Businesses and Professional Practices

[1] Characterization in General

If a spouse claims a community property interest in a small business or professional practice in proceedings for marital dissolution or legal separation, the trial court must (1) characterize the asset as community or separate, In re Marriage of Geraci (2006) 144 Cal. App. 4th 1278, 1292–1293, and (2) determine the feasibility of dividing any community interest in it.

If the evidence shows that the business or practice was acquired or established with community property during marriage, then the asset is presumed community. Fam. Code § 760.

If this presumption is not rebutted, the court must decide the most appropriate method of equally dividing that community interest. That is, it must ascertain whether it is appropriate to divide the asset in kind, to order a sale and division of the proceeds, or to “cash out” one party and award the entire asset to the other, keeping in mind that a professional practice must be allocated to the spouse who is licensed to engage in it. Fam. Code § 2550.

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