For professionals and business owners, divorce can pose significant risks to the stability and future of their business. In Texas, a community property state, the division of marital assets includes not just personal property but also business interests acquired or grown during the marriage. Protecting your business requires careful planning and proactive strategies.

Is Your Business Considered Community or Separate Property?

The first step in protecting your business during divorce is determining whether it is classified as community property or separate property:

1. Separate Property:

A business started before marriage or inherited by one spouse is generally considered separate property. However, any increase in value during the marriage may be subject to division.

2. Community Property:

If the business was established during the marriage or marital funds were used to grow it, it will likely be considered community property.

The court will evaluate the business’s value and decide how to divide it equitably.

Strategies to Protect Your Business

1. Pre-Marital or Post-Marital Agreements:

These agreements can specify that the business remains separate property or outline terms for its division in the event of divorce.

2. Business Valuation:

Hire a professional to conduct a valuation of your business to ensure accurate calculations. This includes evaluating assets, liabilities, and the business’s earning potential.

3. Buy-Sell Agreements:

If you have business partners, a buy-sell agreement can outline terms for retaining ownership in case of divorce, preventing the business from being divided or sold.

4. Separate Business Finances:

Keeping business and personal finances separate is critical for proving the business’s classification as separate property. Avoid using marital funds to finance business operations or expansion.

5. Mediation or Collaborative Divorce:

Consider alternative dispute resolution methods to negotiate terms that protect the business while satisfying both parties.

What to Expect During Property Division

Texas courts strive for an equitable (not necessarily equal) division of community property. If your business is considered a marital asset, options may include:

• Buying Out Your Spouse: Offering other assets in exchange for their share of the business.

• Co-Ownership: Continuing to co-own the business, though this arrangement is rare and typically not advised.

• Selling the Business: Selling the business and splitting the proceeds, though this is often a last resort.

Each situation is unique, and an experienced attorney can help tailor a strategy to protect your business.

Let Us Help Protect Your Business

Divorce is challenging, but with the right legal guidance, you can protect what you’ve worked so hard to build. At Webb Family Law Firm, we have extensive experience assisting professionals and business owners with complex property division during divorce.

Contact Webb Family Law Firm today to discuss your case and safeguard your business interests.