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How to protect your company in a divorce in Texas

On Behalf of | Jul 5, 2022 | Divorce

As a community property state, Texas views all property acquired during a marriage as equally owned. Courts will opt for a 50/50 split of property when a couple divorces. There are a few exceptions to this. Property that you owned before marriage is your individual property, as long as you didn’t use marital assets to improve or maintain it. Capital gains, however, are marital property when they occur during the marriage.

Take steps to protect your company before marriage

The best way to protect your company from the effects of divorce is to get a prenuptial agreement that states your company will remain individual property. It’s important to protect your ownership of it, as well as the profits from it. If you didn’t specify what would happen to a business in the prenup, you could negotiate a postnuptial agreement with your spouse.

Try mediation

For those who are already in the divorce process with neither type of agreement, you could consider asking your spouse to try mediation to peacefully resolve key issues of your divorce settlement. There is no obligation to sign an agreement when you go through mediation, but ideally, the two of you will be able to come to a formal agreement.

In situations where you co-own the business with your spouse, it might take more thought and negotiation to figure out what to do with the company. If you or your spouse are unwilling to be in the same business together, then one is going to have to buy out the other. Otherwise, both of you will probably have to sell or shut down the business if you truly can’t come to an agreement and can’t tolerate running the company together.

Depending on your situation, you might have to sacrifice other assets in order to maintain ownership of your business. It’s worth seeing a mediator to help keep negotiations peaceful as you and your spouse go through the difficult process of dividing your assets.