Navigating Divorce in Texas: What Will Happen to Your Business?

 Posted on July 19, 2023 in Property Division

As a community property state, marital property is divided evenly in a Texas divorce. Does the same rule apply to your business? Our attorneys answer this question by exploring the implications of the community property rule. We also share strategies you can adopt during property division to reach a positive and profitable outcome after a divorce. 

Understanding the Implications of Texas as a Community State  

Texas divorce laws characterize assets and debts accumulated during marriage as marital property. According to the community property rule, these assets and financial obligations are split equally between divorcing spouses. 

Your business does fall into this category if you started the venture after marriage. Or if your spouse became a stakeholder, investor, or business partner in the company after marriage. 

Unless you signed a premarital or postnuptial agreement to characterize your business as separate property, it is typically considered part of the community property. 

The Texas court shall assess its value before dividing it between you and your spouse during the dissolution of your marriage. 

3 Ways to Divide or Share Your Business After a Divorce in Texas

It does not matter if the court characterizes your business as separate or community property. The revenue generated after marriage may be considered community property. That means you must figure out how to split these profits with your soon-to-be-ex-spouse. 

Most divorcing couples agree upon one of the following resolutions:

1. You can retain business ownership by buying out your partner’s share. You can do this by offering them a significant portion of another community property in exchange for the business. 

2. The court may ask you to sell your business to a third party and split the profits with your partner. 

3. You can continue working alongside your partner to ensure the business stays within the family if you maintain an amicable relationship with your ex. 

The first solution works for business owners supervising a family business, passed down from generation to generation, or solopreneurs who want to keep their business. In this scenario, you would like to avoid transferring ownership to anyone else. If your partner refuses to accept assets in exchange for the business, you may have to sell it to a third party. 

The third strategy is a last resort for business-minded spouses that started the venture together. However, this can prove risky in the aftermath of a high-conflict divorce. It is best to sell the business or divide corporate responsibilities to minimize conflicts in your organization. 

Contact Texas Divorce Attorneys 

Whether you intend to file a divorce yourself or hire an attorney, it is crucial to know what will happen to your business after the dissolution of your marriage. A lawyer can provide actionable advice that helps you protect your business and retain ownership after the split. To know more about high-asset divorces, contact Texas divorce lawyers from the Law Office of Linda Risinger by dialing 972-294-6533 today to book a free consultation. 

Sources:

https://statutes.capitol.texas.gov/Docs/FA/htm/FA.6.htm#6.301

https://www.forbes.com/advisor/legal/divorce/texas-divorce/