What You Should Know About Divorce and Business Ownership in Texas

 Posted on June 29, 2023 in Family Law

State law in Texas recognizes community property in cases where couples are married. Both communal property and marital debts must be divided when a couple files for divorce. When the phrase "community property" is used, it is frequently assumed that it refers to things like a couple's marital home, their vehicles, their personal property, and their bank accounts. In the majority of cases, those things do indeed fit under that category. However, business ownership or a stake in a family business is another type of asset that may or may not be considered community property.

How Divorce Can Affect Your Business in Texas

Divorce proceedings can have a variety of effects on a business owner. It can be challenging for a person to take care of the day-to-day requirements of running a business while also navigating the legal aspects of divorce, which may involve going to divorce settlement conferences and appearing in court. Utilizing key personnel, lowering workloads where possible, working a reduced schedule, and hiring temporary workers that can help maintain the existing anticipated level of your company are all options that may be available to business owners during the divorce process.

Because it can be considered a communal asset, a business may be impacted by a divorce as well. In other words, a business owner’s spouse could be able to claim a share of the company. In many cases, it is a good idea for business owners to plan for this possibility before getting married. A premarital agreement may be used to ensure that a business owner will be able to maintain full ownership of the company in the event of divorce.

Divorce and the Division of a Business

In general, a business that was founded during a couple’s marriage will be considered community property. A business valuation can help ensure that issues related to a business will be considered correctly during the divorce process. This can ensure that the value of the business will be fully understood, and it can also provide insight into the benefits that ownership of the business will provide to a spouse in the future.

When dividing marital property, a spouse may wish to be the sole owner of a business going forward, and they may do so by ensuring that the other spouse will receive other assets that are similar in value. This is often the ideal solution in cases where one spouse has been primarily involved in managing a business and wishes to continue serving in this role. If it will not be possible for one spouse to assume sole ownership of the business, the couple may choose to sell the business, and they can then divide the profits earned from the sale.

In some cases, a couple may choose to continue owning and managing a business jointly. This may be preferable if both parties were actively involved in the business. However, this could potentially lead to problems down the road if disagreements arise over how the business should be managed. Ex-spouses who wish to continue working together as business partners can protect their interests by creating a partnership agreement that fully details their responsibilities and specifies how disputes should be addressed.

Contact a Llano County Business Asset Division Lawyer

The Law Office of Russ Alan Baker, PLLC can assist you in ensuring that a business owned by you or your spouse own will be handled appropriately during your divorce. We will work with you to negotiate a divorce settlement that will safeguard your financial interests. Call our Marble Falls property division attorney at  325-216-2006 to get in touch with us and schedule a consultation. We provide assistance with complex divorce cases in Burnet, San Saba, Johnson City, Blanco, Gillespie, Llano, Brown, Lampasas, Bertram, Llano County, Marble Falls, Mills, Mason, Fredericksburg, and the surrounding areas of Central Texas. 

Source: 

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