Under Texas law, all community property is typically subject to equitable division. In an uncontested divorce, you and your soon-to-be-ex have latitude regarding who gets what. If you both agree, you can divide personal property as you wish. However, when there is a business involved, the proceedings are more complex. At Hope Family Law P.C., we often assist clients in identifying solutions that minimize the impact of divorce on the company.
Texas is a community property state, which means that your ex may get half of your company. According to Inc, even if your partner has no involvement with your business, he or she may wind up as your business partner in a divorce. All property acquired during your marriage is community property, regardless of who owns what or who holds the title. Separate property includes the following:
- An inheritance received by one spouse entirely
- Gift received by one spouse from a separate third party
- Property owned before the marriage
- Award from the pain and suffering part of a personal injury judgment
You can take steps that help protect your business in a divorce, but you should take them before your marriage becomes troubled. One of these methods is formalizing Buy-Sell Agreements, a Partnership, LLC or other structures that enable you to “lock-out” your spouse. These documents should contain provisions that protect the interests of the other owners in the event one of you gets divorced.
Provisions can include requiring a prenuptial agreement for unmarried partners at the organization’s inception. They may also prohibit the transfer of shares to your spouse without the partners’ approval.
Many entrepreneurs reinvest everything back into the company rather than take a salary. Your ex could claim that the household didn’t benefit from you personally, as all money went back to into the company. As a result, they may get a larger percentage of the business or more in the settlement. Paying yourself a competitive salary can help avoid this situation.
Owing a business adds complexity to a divorce. An experienced attorney can help you explore your options for the best possible outcome. Visit our webpage for more information on this topic.