If you are facing a divorce, one of the critical elements is the division of your marital property. If you own a business, it tends to complicate an already complicated issue. Running a business requires careful strategizing, and protecting your business in a divorce does as well.
In the state of Texas, marital property is divided in a manner that is considered just and right – as opposed to necessarily being divided equally. In essence, this means your marital property will be divided in a manner that is considered fair, given the circumstances. Marital property generally refers to those assets that you and your spouse acquired during the course of your marriage. At the time of divorce, all property is presumed to be marital property unless you have clear and convincing evidence to the contrary. If you came into your marriage with a business, there are certain factors that can help you maintain its status as separate property, including:
- Strictly maintaining the formalities of running a business
- Keeping your business separate from your marital finances by not commingling business and personal funds
- Paying yourself a fair salary (otherwise, your marital estate could maintain a claim on the time, toil, and effort you put into the business, which would have enhanced your separate property)
A Prenuptial Agreement Can Make a Difference
Owning a business is often a solid reason for effecting a prenuptial or post-nuptial agreement, which can pinpoint your business as your own property – instead of later having to defeat the presumption of community property in the event of divorce. Further, if you are a sole proprietor and are considering incorporating, it is important to carefully consider the possible consequences. The stock created by incorporation would likely be considered community property in a divorce. A divorce attorney who is experienced with business considerations can help you carefully explore your legal options.
When Your Business Is Marital Property
If your business is inarguably marital property, but you run the business and do not want to lose it in divorce, you will likely need to provide your spouse with his or her fair share of the business’s value, which necessitates acquiring a neutral business valuation in which you are both confident. Once you have such a valuation, you will be better able to negotiate for a division of property that allows you to move forward with your business. Often times, business owners must get creative in order to keep a business intact throughout the divorce process and beyond.