What Happens to My Business in a Divorce?
Divorces can be tricky, and often are, while navigating many concerns, such as who’s taking the dog? Or where will the children primarily live? But also, how will we divide our property? And if you own a business together, it can get trickier.
There are multiple distinctions between property and business divisions, and understanding them is essential. We aim to ensure you know what to expect when your property comes up during the divorce conversation and how to proceed.
Separate vs. Community Property
Property Divisions is any personal property obtained before or during the marriage, broken down into two pillars: separate and community property.
- Separate Property: Any property you owned before the marriage, such as real estate, vehicles, and other material items or monetary value (stocks, investments, etc.), but know that any investments made post-marriage are then considered community.
Gifts given to you (and only you) during the marriage, as well as any recovery for personal injury damages (pain and suffering, disfigurement, physical impairment), are also considered separate property (except lost wages).
- Community Property: Any property acquired by either spouse during the marriage (mortgages, loans, debt, real estate, vehicles, etc.) are considered community property and will be split evenly during a divorce unless you and your ex come to other agreements.
Commonly asked questions regarding Separate vs. Community Property:
- My family member left me their real estate after passing; does my partner have a shared interest?
No, your partner is not entitled to any property acquired by an estate left to you.
- My partner took on debt (student loans, auto loans, credit cards, etc.) during our marriage; is this considered community property?
Yes, you and your partner are responsible for any debt acquired during the marriage, so have honest, authentic discussions before taking on debt.
- How is property divided?
The court will often divide property equally unless extraordinary circumstances such as abandonment, adultery, or cruelty occur. Then the division may shift in favor of the other partner.
Business Assets & Companies
Under the umbrella of community property, businesses may fall into this category if the business assets or companies were accrued or created during the marriage. As Texas is a community property state, your business(es) are subject to a division by a Texas divorce court.
- Is my business considered community property?
This depends if the company was created during the marriage and if each individual has an equal/shared interest in the company.
- Yes, the business is jointly owned by my partner, and we both have an equal share. Now what?
The judge will try to come to an equal division without destroying the business, which may include one side getting the company. At the same time, the other receives real property or retirement funds to make up for lost value.
- My spouse and I cannot come to an agreement regarding our business. What happens next?
The judge may dissolve the company and divide any investment/revenue equally.
While separating property can become intricate, it’s essential to understand what’s at stake and talk to your legal representation when filing for divorce. If you need representation or have any questions, please contact us today.