Will My Spouse Get Half of My Business if We Divorce in Texas?

man and woman with jar of money in middle

It takes a lot of time, effort, and money to build and run a business, which is why the mere thought of losing your business to your spouse upon divorce may seem too frustrating and devastating.

If you run a business and are headed for a divorce, you need to learn about the state’s property division laws to understand what happens to your business if you get divorced.

It is essential to contact an experienced divorce attorney in Texas if you are a business owner contemplating or going through a divorce. A Waco divorce lawyer will protect your rights and interests and help you make an informed decision about your business during your divorce case.

Separate vs. Community Property in Texas Property Division Disputes

In order to determine if your spouse can get half of your business if you file for divorce, it is important to understand property division laws in Texas.

Your property during a marriage can be split into two categories:

  1. Separate property. Separate property is any property you owned and acquired before the marriage. Under Texas law, gifts and inheritance acquired during the marriage are also considered separate property unless the gifted or inherited assets become commingled.

  2. Community property. Community property is any type of property – assets and liabilities – you and your spouse have acquired during the marriage (the only exception are gifts and inheritance received by either spouse while married).

Note: Separate property may lose its “separate” status if the assets become commingled (mixed) with community property during the marriage.

When spouses file for divorce, each party will retain their own separate property, while community property will be divided between the parties in a “just and equitable” manner.

What is Equitable Division of Property in Texas?

Texas is a community property state under Texas Family Code § 3.002. It means that all community property of a married couple must be split between the spouses in a just and equitable manner upon a divorce.

While “just and equitable” often results in a 50/50 split, the community property may not always be divided equally. If equitable is not “equal,” then what is it? Essentially, equitable means fair and just.

In order to divided community property equitably, Texas courts consider a variety of factors, including each spouse’s:

  • Age

  • Health

  • Earning capacity

  • Education

  • Current employment and work history

  • Contributions to the marriage

  • Separate assets and liabilities

  • The current child custody arrangement if the couple has children

You may not have to go to court to divide your property, including your business, if you and your spouse agree on all of the terms of your property and debt division. It is advisable to seek help from an experienced divorce attorney to help you negotiate property division with your spouse.

Is Your Business Separate vs. Community Property in Texas?

Finally, we get to one of the main questions, “Is business considered separate or community property?” Unfortunately, there is no straightforward answer to that question.

It is difficult to classify a business as a community or separate property, especially if it was created by one of the spouses during the marriage. As a rule of thumb, if you created your business before the marriage, your business will not be subject to property division upon divorce.

However, if you started a business while married, it would most likely be considered community property. As a result, any income from your business will be divided between you and your spouse if you get divorced.

In fact, your spouse may even be entitled to half of your business if the court considers such division to be equitable and fair. If any of the following is true, your spouse is most likely entitled to a portion of your business:

  • You founded your business while married;

  • You built or expanded your business using marital funds; and

  • Your spouse contributed to your business in any way (e.g., he or she donated money, served as a manager or business partner, or worked in any other capacity).

Given that your spouse could claim a portion of your business in a Texas divorce, it is critical to contact a skilled attorney as soon as you know that your marriage is headed for divorce, especially if you and your spouse cannot reach an agreement on property division.

What to Do if Your Spouse is Entitled to a Part of Your Business?

If your business is considered community property and your spouse is entitled to a portion of it, you may wonder what happens to your business. The first thing you need to do is get a valuation of your business to determine its worth.

However, if you and your spouse know how much your business is worth, you can agree on a predetermined value without requesting a business valuation. Once you know your business’s value, you need to decide how to “divide” the business in a divorce.

There are several options to divide a business between spouses in a divorce:

  • Award your spouse a certain percentage of the business assets or income.

  • Buy out your spouse’s percentage of the business.

  • Offer a spouse your other assents in exchange for their business ownership.

  • Continue to jointly own the business.

  • Divide your business into two separate organizations or entities.

  • Sell your business and divide the proceeds between you and your spouse.

  • Dissolve the business.

It is best to consult with a skilled divorce attorney to identify the most appropriate option in your particular situation.

Talk to a Waco Divorce Lawyer Today

If you are concerned that your spouse could get half of your business when you end your marriage, consult with our Waco divorce attorney at The Law Office of Brett H. Pritchard to talk about your options.

Our lawyers can help you protect your business and other separate assets and navigate property division laws in Texas. We strive to give our clients the best possible outcome in their divorce disputes. Call 254-501-4040 to receive a consultation.
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