Navigating a Divorce as a Business Owner in Texas (2023)

Serving Families Throughout McKinney
divorce disagreement between business partners

Divorce places a considerable amount of stress on a relationship that is already strained. When one or both partners own a business and seek a divorce in Texas, additional anxiety can accompany the process. It may sound astonishing, but the most appropriate time to consider a divorce in Texas is before getting married.

There are fundamental reasons for this consideration, not just the possibility of an easy exit strategy. However, many entrepreneurs undertake business ownership after a marriage has occurred. Regardless, planning for your future financial security is essential.

Divorce Does Not Always Have to Be Contentious

Even the most amicable divorces are stressful. In Texas, there are options when considering how to end a marriage, and there are options that may benefit a business owner and their partner better. Divorces in Texas can be uncontested, contested, or collaborative.

Uncontested Divorce

Couples in an uncontested divorce have agreed on their reason for dissolving the relationship and the terms of that dissolution. Additionally, they have decided on the division of property and debts, making the divorce process more amicable. But even when divorces start out uncontested, they are vulnerable to the stresses accompanying the division of personal and business assets.

Contested Divorce

Couples often cannot agree to the terms of a divorce, leading to the divorce being contested. One or both partners are at odds with terms, such as the division of property, child custody and support, and / or division of debts.

Contested divorces can be worked out, sometimes through a long process, utilizing informal settlement conferences. When these conferences are ineffective, the courts will intervene, often ordering mediation before a judge makes the final determinations on critical decisions such as asset distribution.

Collaborative Divorce

Couples pursuing a collaborative divorce work together with the help of the same team to find agreeable terms for ending a marriage. Even in collaborative divorces, it is always recommended to work with an experienced Texas family law and divorce attorney.

Why The Type of Divorce Matters

Texas is a community property state that seeks to divide property during a divorce in a just and right manner, which does not always mean equally. When dividing property in a divorce in Texas, couples pursuing an uncontested or collaborative divorce will have a say in how this property is divided. Guided by an experienced Texas divorce attorney, couples who can work together will have more control of their financial future.

Couples going through a contested divorce process who cannot agree to the terms of a divorce are subject to the court’s division of the property. Texas family courts divide all marital properties in Texas into two categories – separate property and community property. The classification of a business will determine its division.

Separate vs. Community Property

Properties belonging to a spouse before the marriage are considered separate properties. Additionally, any asset you receive as a gift or inheritance is considered separate property. Any property acquired during a marriage, including a business, is community property or property belonging to both spouses.

These descriptions seem straightforward until you consider that any income produced during the marriage from a business categorized as separate property will likely be considered community property because it was earned during the marriage. Particularly in a contested divorce, there must be proof that an asset, such as a business, is separate property.

To make determining property types even more challenging, the commingling of marital assets, such as funds earned by both spouses used to benefit a separate property, can make property division even more confusing and complicated. It is essential to keep separate property funds and income in a different account to avoid commingling.

How to Protect a Business During Divorce

There are ways to protect your business during a divorce, which require the approval of both partners. Again, preparing for a divorce before a marriage takes place is essential to thriving in the future should a divorce occur.

Create a Premarital Agreement

Premarital agreements, created and signed before a marriage takes place, help protect your business if a divorce occurs, defining what will happen to business assets. Especially when additional partners are involved in a business venture, it can be beneficial to include a clause in the business agreement to establish the terms if a partner experiences a divorce. It is necessary to consider the structure of your business to protect your ability to earn an income.

Seek a Postmarital Agreement

These agreements are created after a marriage becomes legal and can be intended to designate the division of marital property, assets, and debts. These agreements are often appealing to the spouse not involved with the business because the agreement can protect them from the division of business debts in the event of a divorce. Partners can work together to agree to the terms, even specifying that revenue from the business is to remain separate property.

Texas courts will ensure that both partners entered postmarital agreements willingly, so always work with an experienced Texas family law attorney when crafting any binding document.

Additional Ways to Navigate Divorce as a Texas Business Owner

The spouse more vested in the business may choose to buy out their partner, giving more of a share of the other marital assets to their partner in return for business ownership. If assets in the marriage do not equally compensate for the business, then a payment plan is an option.

Spouses may also opt to become co-owners in the business, which requires tremendous communication skills for both parties. Trust is essential to continue a financial commitment to each other.

And finally, both parties may agree to sell the business and split the earnings from the sale. This process will require a business valuation.

Determining The Value of a Business

A professional who possesses the proper accreditation or certifications should perform a Texas property valuation. It is imperative to seek guidance from a supportive Texas divorce attorney who will work to ensure your needs are met. More than the physical assets of a business are considered during the valuation process, so working with qualified professionals is essential for a proper valuation.

Experienced Divorce Advocacy for McKinney, Texas Business Owners

As a business owner, you make many sacrifices to ensure the operation and safekeeping of a company. Part of that responsibility is to plan for unforeseen events. No one wants a marriage to end in divorce, but when it does, a business owner will want to ensure their ability to secure a stable income and continue life successfully with their livelihood intact.

Speak with the experienced attorney at Petitt Family Law to learn how we can set you on the path to secure business ownership before, during, and / or after a marriage. Our McKinney divorce lawyer, Melody Petitt, wants you to be prepared and provide the guidance you need to navigate any of life’s challenges successfully.