Can a Prenup Protect My Business in California?

If you're a business owner in California, one of your biggest concerns before marriage may be how to safeguard the company you've built. Under California's community property laws, most income and property acquired during marriage is considered community property and is subject to equal division in a divorce. That can put your business at risk.

The good news: a well-drafted prenuptial agreement (prenup) can protect your business.

Why Businesses Are at Risk Without a Prenup

By default, California law treats any increase in value of a business during marriage as community property, even if you started the business before marriage. That means:

Your spouse may be entitled to a share of the appreciation.
Marital income invested into the business may give your spouse a financial claim.
Disputes about ownership can threaten the stability of the company.

💡 Example: If you start a restaurant before marriage and it doubles in value during the marriage, your spouse may argue for half of that growth.

How a Prenup Protects Your Business

A prenup allows you to override California's default community property rules. Here's how:

Define business ownership clearly: State that your business remains your separate property.
Control division of future profits: Decide in advance how income from the business will be treated.
Address debts: Ensure that any liabilities tied to the business are your responsibility, not your spouse's.
Plan for buyouts: Outline terms if one spouse contributes to the business and later seeks compensation.

Special Considerations for Professionals and Entrepreneurs

Professional practices: Doctors, lawyers, and accountants often use prenups to protect their practices.
Startups: Founders protect equity and investor relationships by clarifying ownership.
Family businesses: Prenups help preserve multi-generational ownership and prevent disputes.

Limitations You Should Know

A prenup cannot prevent fair compensation for contributions your spouse makes during the marriage. For example, if your spouse works in your business without pay, they may still have a claim (unless waived in written).

Prenups must meet California's strict requirements: full financial disclosure, 7-day review period, and independent counsel. If you're protecting a business, you'll need to make sure you disclose it properly. Hiding a business interest is one of the fastest ways to invalidate a prenup. Learn more about the top reasons California prenups get invalidated

Key Takeaways

For California business owners, a prenup is one of the most effective tools to protect your company from the uncertainties of divorce. By clearly defining ownership, income, and debt responsibility, you can preserve the business you've worked so hard to build.

📞 Thinking about marriage and worried about your business? Contact our office today to discuss how a prenup can safeguard your company under California law.

Want a bigger picture of what prenups and postnups can do? Read our Complete Guide to California Prenups and Postnups

Get Free Consultation

All content provided on this blog is for informational purposes only. We will not be liable for any errors or omissions in this information nor for the availability of this information. These terms and conditions of use are subject to change at any time and without notice. The information provided here and the content on our website related to legal matters (“Information”) is provided for your private use and does not constitute legal advice. You should consult a licensed attorney if you need legal advice for a specific problem. The information provided here is not a substitute for legal advice from a qualified attorney licensed to practice in an appropriate jurisdiction.

Can a Prenup Protect My Business in California?