Divorce

What Would Happen with Your Business if You Divorce?

Property Division and Business Ownership

Wondering what would happen with your business if you divorce could keep you awake at night. After all, you put hard work into creating a business. Will divorce mean the end of it? In Texas, the courts divide marital property equally. The crucial factor is whether your business is marital or separate property. If the court decides it is marital property, your spouse may have the right to half of your business as part of property division.

The Texas Family Code defines marital property (or community property) as “property, other than separate property, acquired by either spouse during marriage.”

Under what circumstances is a business considered marital property?

If your spouse also worked in the business, the court would view it as marital property. If you deposited business funds into a joint bank account with your spouse, the business would be community property. If your spouse helped you by contributing ideas to how you ran your business, there would be some co-ownership. If you used income earned by both you and your spouse to start the business during your marriage, there is co-ownership. Even if you had your business prior to marriage, unless you kept the money regarding the business in a separate account and had the business pay you a salary, you might not be able to make the case that the business was separate property.

If the court decides your business is community property, what are your options?

You don’t have to dissolve your business, although that is an option. You could sell the business and split the proceeds. However, the following are other options you could also consider:

  • Offer your spouse an asset of equal or more value than the business. An example might be the family home, real estate property or a stock portfolio.
  • Obtain a neutral business partner who will buy your spouse's share of the business.
  • Continue to run the business with your spouse (if you can get along and reasonably do so)
  • Reach a settlement to pay over time for your spouse’s share of the business

Consult with an experience family law attorney

If you’re concerned about how divorce could affect your business, discuss divorce options with an experienced family law attorney. At Pfister Family Law we have years of experience and can offer valuable legal advice to help you make the right decisions.

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