Divorce for Business Owners

Divorce for Business Owners in TX

If your business is considered marital property, there are several ways to divide it during divorce.

Business owners going through adivorce are naturally very concerned about what will happen to their business during the proceedings. Texas is a community property state, which means that marital assets such as a business are divided during a divorce in a manner that is “just and right”. That does not always mean an even 50/50 split. It is crucial to work with a divorce lawyer that can determine if your business is marital or separate property, and that can help you come to a resolution that is most appropriate for you when dividing it.

Determining if a Business is Marital or Separate Property

Marital property includes any debts or assets that were acquired by the couple during the marriage. Separate property includes debts and assets a person acquired on his or her own and brought into the marriage. As such, it is natural to assume that if one spouse started the business before getting married, it is considered separate property. Unfortunately, it is not that simple.

Even when a business was acquired prior to the marriage, it can still be considered community property. For example, if the profits from the business were ever used to contribute to the marital household, it may be considered community property. Or, if the business’ revenue was placed in the same bank account used by the couple jointly, it could also be considered community property by the actual of commingling the funds. There are ways to trace the source of the funds – both into and out of the joint account, but this can be complicated and require the assistance of trained forensic accountants.

So, if your business is considered community property, how will it be divided during a divorce?

Dividing a Business During Divorce

When a business is considered marital property, it is subject to theproperty division rules of the state. Of course, it is not practical to divide a business in half, so there are three ways your business may be divided.

The first way to divide your business is to buy your spouse out of the business. The value of the business is assessed, and you will pay your spouse for their half (or percentage portion) of the business. In this scenario, a judge may award your spouse something of equal value during property division proceedings, such as the marital home, and you keep your business without making any payments to your spouse.

The second scenario for dividing your business involves selling it. After the business is sold, the proceeds are then divided between you and your spouse. Businesses are often divided this way when the spouses cannot agree how to divide the business, or when the business is not profitable enough to adequately compensate the spouse that will give up ownership of it. If the company is incorporated or otherwise subject to articles of formation and bylaws, it is possible the entity has established rules for the event of a divorce or death of a partner.

Lastly, you and your spouse may decide to continue to run the business together and continue to split the profits/losses. This is the rarest way to divide a business, but it is appropriate in some situations.

Musemeche Law Can Help You Keep Your Business

If you are a business owner that is getting a divorce, our League City divorce lawyer Rob Musemeche at Musemeche Law, P.C., can help. We will ensure your business value is assessed properly, and will work hard to secure the most favorable outcome for you. Call us today at (281) 475-4145 or contact us online to schedule a meeting with one of our experienced attorneys.