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What happens to your business assets in a divorce?

On Behalf of | Aug 24, 2023 | Divorce

Divorce poses numerous challenges, and the stakes rise even higher when you own a business. As a community property state, Texas follows specific rules when dividing assets during a divorce.

In Texas, the law typically views any property acquired during the marriage as community property unless you can prove otherwise. Thus, if you started your business after tying the knot, it falls under this category. However, even if you founded your business before your marriage, any growth in its value during the wedded years might become part of the community estate. This depends on the contributions both spouses made to the business.

Determining the business’s worth

A critical step in the divorce process involves determining your business’s value. To get an accurate estimate, you might seek the expertise of accountants or valuation professionals. They will look at various aspects, including the company’s assets, debts, projected earnings and prevailing market conditions.

Handling the business division

Once you have assessed the business’s worth, you will face the challenge of dividing it fairly. Several strategies can help you navigate this:

  • Sell the business. You might consider selling the business if neither party wants to keep it. After selling, you can then split the proceeds between you and your spouse.
  • Buy your spouse’s share of the business. If you have a strong desire to keep the business, consider buying out your spouse. This action could mean giving them a lump sum or setting up a structured payment plan over time.

Though not ideal for everyone, both parties could continue to run the business together. This choice demands a harmonious working relationship and clearly set boundaries.

Shielding your business

In the future, you might want to consider protective measures to keep your business out of potential marital disputes. Drafting a prenuptial or postnuptial agreement can help in outlining clear business ownership terms. Maintaining a distinct line between business and personal finances and refraining from using marital funds for the business can further ensure its classification as separate property.

Managing a business amid a Texas divorce requires careful planning and informed decisions. Keeping the lines of communication open and staying well-informed will help you end up with a favorable outcome.