Splitting a business in divorce

Business owners in Texas who are divorcing may be interested in how a separation could impact their enterprises. A business is generally considered shared marital property, but judges will also consider what percentage of the business was built up prior to the marriage as well as how liquid its assets might be. Another aspect judges will consider is that an intact business is more likely to provide maintenance payments.

Individuals may be wise to get legal advice early on in the process to avoid any errors such as letting a spouse go who works for the company. Doing this could lead to a wrongful dismissal claim. Like other aspects of a divorce, the degree of involvement the spouse will have in the business must be negotiated.

Another mistake is attempting to hide assets or even giving the appearance of hiding assets. While an action like lowering a credit card limit might seem necessary, it might also appear to the court that an attempt is being made to limit the spouse’s access to assets. Therefore, legal advice may be a good idea in this case as well. Final financial agreements should be made legally binding for everyone’s protection, and business owners may want to consider a prenuptial agreement in the future.

Even though Texas is a community property state, this doesn’t mean that a business owned by one spouse will be split 50/50 in a termination of marriage. Such a split may be impractical based on the nature of the business. One spouse might agree to relinquish his or her share of the business in exchange for other assets such as real estate or retirement accounts. If both individuals have each played a large part in running the business, negotiations could become more complex, and attorneys may be of assistance.