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How will a personal business be handled in a divorce?

On Behalf of | Sep 14, 2022 | Family Law & Divorce

Divorce is known to be one of the most stressful transitions that you may ever have to face. In addition to being draining both emotionally and financially, afterward, your life will certainly be entirely different.

For couples that own a business, the stakes can be even higher. Your divorce may not only alter your personal life but your career as well. What will happen to your business during a divorce in Texas?

Is Texas a community property state?

Texas is a community property state. Assets acquired during the marriage are the property of both spouses. Texas courts divide all marital property fairly between divorcing couples.

Is your business community property or a personal asset?

Determining whether a business is community property or a personal asset will determine its future. To prove a separate property business you must show:

  • The founding date for the business predates the marriage
  • The source of funds used to start the business contained no marital funds
  • The contributions of each spouse to the business, or the lack thereof

What if there are components of both elements?

Even if your business is separate property, there are usually some community components as well. You must value and account for those elements during the property distribution portion of the divorce. Community interests may include:

  • Funds from joint accounts used to expand or invest in the business
  • Appreciation in the company’s value deriving from joint financial contributions
  • The non-owning spouse’s contributions to the business

Determining a business’s value and potentially dividing it is a complicated and emotional process. Staying objective, and focusing on the future, will help the process go as smoothly as possible.