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Protecting your business during divorce

by | Aug 3, 2021 | Divorce

Divorce is never easy. Business owners, however, face unique obstacles when working to mitigate the impact of the divorce on business operations. The following will focus primarily on how the process unfolds in Texas.

Texas is a community property state. This basically means that the state views any assets acquired during the marriage as owned equally by both spouses. The state refers to these assets as community property. In contrast, the state refers to assets acquired before the marriage as separate property. When it comes to a divorce, the courts attempt to divide community property in a fair manner.

What does this mean for my business?

Ideally, business owners like yourself will take proactive measures to protect their business before facing a divorce. Two of the more common examples of proactive measures include prenuptial and postnuptial agreements. These are legal contracts that can be used to specify a number of things, including how the couple would handle the business in the event of a divorce. The main difference between these two contracts is the timing. A couple puts together a prenuptial agreement prior to the marriage and a postnuptial during the marriage.

The divorce process will unfold a bit differently for those who have not set up these protective measures. In these situations the court will likely question when the business was started. If started before the marriage, the court would likely only consider splitting the business growth that occurred during the marriage. If started during the marriage, the courts may consider the entire enterprise to be marital property subject to division.

Does this mean I will lose my business?

Not necessarily. There are tactics you can use during the divorce process to better ensure you retain full ownership of the business. This could include exchanging another asset, of equal value, for ownership.