Texas law generally considers property acquired during the marriage as community property subject to division during divorce. This can include any business interests developed or sustained during the marriage. This point is extremely important for business owners going through divorce as a failure to move forward with care can have negative impact on business operations.
Business owners can mitigate this risk by taking the following steps.
Step 1: Learn how Texas law defines property in divorce
Texas is a community property state, meaning that the courts will likely consider most property acquired during the marriage as owned jointly by both spouses and subject to division upon divorce. However, there are exceptions such as inheritance and assets owned prior to the marriage.
For business owners, this is an important distinction. If you started the business before the marriage, you may be able to argue that only the increase in value during the marriage is subject to division. If started during the marriage, the courts will likely consider the entire business value community property.
Step 2: Consider legal strategies to protect business interests
There are many different legal strategies that can help business owners protect their business during a divorce. Some of the more common include:
- Prenuptial and postnuptial agreements: These contracts can specify what happens to a business in the event of a divorce, protecting business assets as separate property.
- Buy-sell agreements: Often used in partnerships, these agreements can be structured to prevent a spouse from acquiring a business interest through divorce.
- Negotiations. Business owners can also offer other property of similar value in exchange to retaining full ownership of the business. It is important to carefully determine the proper value of the assets to better ensure a fair trade.
Navigating a divorce in Texas when business interests are involved requires a strategic approach to protect these assets. Understanding how Texas law classifies property and utilizing legal tools can provide the protection needed to reduce the impact of the divorce on the business’ bottom line.