Under Arizona law, generally a business or interest that you have in a
business that you acquired or owned prior to the marriage is your sole
and separate property and continues to be so even during the marriage
absent any unusual or unique circumstances.
In the simplest terms, this means if you owned your business or practice
prior to the marriage, you continue to own it and your spouse has no legal
ownership claim to it.
That’s the good news, BUT (unfortunately, there also seems to be
a “but” when you are working with lawyers)…
The marital community (and your spouse by virtue of them being one-half
of that community) may still have a legal,
equitable interest in or lien against your business regardless of whether it is
your sole and separate business which they have no actual ownership interest in.
In general, under Arizona law, all efforts made by either spouse during
the marriage are presumed to be for the benefit of the marital community.
So, your work, time and sweat that you spend in your sole and separate
business to operate it and grow it is considered the “community’s
time” – think of it as analogous to the scene in the movie
Fast Times at Ridgemont High when Sean Penn’s surfer character, Jeff Spicoli, orders a pizza
for himself and has it delivered in history class and the teacher tells
him that the rest of the class is entitled to a slice of the pizza as
it is “our time” so everyone is entitled to share in a pizza
ordered on “our time” together.
If the business has increased in value:
The equitable interest or lien on a sole and separate business will only
apply if there has been an
increase in value of the sole and separate business during the marriage. Any increase attributable
to the “community efforts” will be allocated or apportioned
between the two spouses in a divorce.
Rueschenberg v. Rueschenberg, 219 Ariz. 249, 254, 196 P.3d 852, 857 (App. 2008).
Click here to read Court’s Opinion
If the business has been stagnant or decreased in value:
If the business has remained stagnant or actually decreased in value, there
is no community lien. Using our pizza analogy above, if you came into
the marriage with a single slice and you still have a single slice at
the time of divorce, it’s still all yours and you don’t have
to share any of it with your soon-to-be ex.
As you can imagine, issues regarding whether one spouse’s sole and
separate business has increased in value over the life of the marriage
and calculating the portion of any such increase attributable to “community
efforts” are hotly contested, the subject of extensive argument
and expert testimony during the divorce case, and can be extremely time-consuming
An experienced attorney well versed in Arizona law on this topic can be
invaluable in saving you not only time but money on this issue by guiding
you to the right experts, countering the other side’s arguments,
and achieving an appropriate resolution to the case.
Going through a divorce when you or your spouse have your own business
can be complex and nerve-racking. Having an attorney who is experienced
in dealing with these complicated issues is essential to protecting both
the business and your peace of mind. If you would like to work with one
of our experienced divorce attorneys, please call
OWENS & PERKINS at480.994.8824 to schedule your free 30 minute consultation.