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Community Property • Businesses
CPROP#022
Legal Definition
When a business is developed entirely during a marriage, it is entirely community property.
Plain English Explanation
During a marriage, assets and debts are usually shared, so it makes sense that a business started using community resources (like time and money) would also be shared. Allowing one spouse to have sole ownership of the business would go against the partnership notion of marriage. In other words, marriages run on teamwork - making dinner, raising kids, paying bills. So if Amy starts a cupcake business using ingredients from the community grocery budget, and marketing to their community friends, then that business should belong to the community too. Bob put in community work supporting Amy's dreams, so he deserves an equal part.
Hypothetical
Hypo 1: Bob starts a tech company from his garage while married to Amy. The company grows significantly over the years. Result: Since Bob started and developed the business entirely during his marriage to Amy, the entire business is considered community property, meaning both Bob and Amy equally own the company.
Hypo 2: Amy and Bob get married and Amy decides to start a bakery. She builds it from the ground up during their marriage. Result: Amy's bakery is entirely community property. This means that even though Amy started it by herself, the bakery is equally owned by both Amy and Bob.
Hypo 3: Bob inherits a family business from his father while married to Amy. Result: This rule does not apply here. The business is not community property because it was inherited by Bob, making it his separate property, even though he was married to Amy at the time.
Hypo 2: Amy and Bob get married and Amy decides to start a bakery. She builds it from the ground up during their marriage. Result: Amy's bakery is entirely community property. This means that even though Amy started it by herself, the bakery is equally owned by both Amy and Bob.
Hypo 3: Bob inherits a family business from his father while married to Amy. Result: This rule does not apply here. The business is not community property because it was inherited by Bob, making it his separate property, even though he was married to Amy at the time.
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