What Happens to Businesses in a Texas Divorce?

Divorce is challenging enough, but when a business is involved, the stakes are even higher. In Texas, businesses can be considered community property, meaning they may be subject to division during divorce. If you own a company or share ownership with your spouse, understanding how courts handle business assets is essential.

Are Businesses Community Property in Texas?

Texas follows community property laws, which generally classify assets acquired during marriage as jointly owned. This includes businesses started or significantly grown during the marriage. Even if only one spouse actively managed the business, the other spouse may still have a claim to its value.

However, if the business was established before marriage or acquired through inheritance, it may be considered separate property but proving this requires clear documentation.

How Are Businesses Valued During Divorce?

Valuing a business is one of the most complex steps in a high-asset divorce. Courts typically require:

• Professional Appraisals: A certified business appraiser determines fair market value based on assets, income, and market conditions.
• Forensic Accounting: If there are concerns about hidden income or irregular financial practices, forensic accountants may be involved.
• Tax Analysis: Understanding future tax implications is critical when dividing business interests.

This process ensures that both parties receive a fair settlement, but it can be time-consuming and costly

Options for Dividing a Business

Once the business is valued, there are several ways to divide ownership:

• Buyout: One spouse purchases the other’s share, allowing the business to remain intact under single ownership.
• Sell and Split Proceeds: In some cases, selling the business and dividing the profits is the most practical solution.
• Co-Ownership: Rarely, spouses agree to continue running the business together post-divorce, though this requires strong cooperation.

Each option has pros and cons, and the right choice depends on the nature of the business and the relationship between the spouses.

Strategies to Protect Your Business Before Divorce

If you own a business, planning ahead can save you headaches later. Consider:

• Prenuptial or Postnuptial Agreements: These contracts can specify how business interests will be handled in case of divorce.
• Separate Business and Personal Finances: Mixing funds can make it harder to prove separate property status.
• Maintain Clear Records: Documentation of ownership, investments, and growth is essential for protecting your interests.

FAQ Section

Q: Can my spouse take half my business in a Texas divorce?
Yes, if the business is considered community property. However, courts aim for a fair division, which may involve a buyout rather than splitting ownership.

Q: How do courts handle business debt?
Business debts are treated like other marital debts and divided fairly between spouses.

Meet With Our Team to Learn More About Protecting Your Business in Divorce

Consult with an experienced family law attorney at Kimbrough Legal, PLLC, for help understanding how businesses are handled in Texas divorces and navigating your rights. We know how to meet you where you are by bringing a warm and reasonable approach to your case. Contact us today to schedule a meeting about your business and property concerns.