How Can Divorce Affect Your Business?

In the absence of any prior arrangements, a business created during a marriage is considered joint property of the couple in Texas. Because of this and in almost all cases, both spouses will have some amount of ownership rights in a business owned by both or either spouse. A business started during the marriage will be equally owned by the spouses, while a business started before will have its percentage of community interest determined by a number of factors. In either case, if the marriage ends, this will cause complications not only for each of the parties involved, but for the business itself.

What Can I Lose In Divorce?

Texas is a community property state. Generally, this means all property acquired during the marriage is jointly owned by both spouses.  In the absence of a well-structured written prenuptial agreement, all property acquired during the marriage may be claimed by both spouses—including any businesses or ownership stakes in businesses created during the marriage. As a result, a business will be divided between the parties as if it were any other asset.

How Can I Make Sure This Doesn’t Happen?

If you would like to fully protect your business prior to entering a marriage, a prenuptial agreement or “prenup” is the most secure way to do so. The other option is a postnuptial agreement signed during a marriage, but these are less frequently recognized and more frequently challenged than prenups, so they are not usually recommended.

There are a few other preventative steps that you can take to ensure that a divorce does not negatively affect your business interests. Every company’s governing documents and buy-sell agreements should always include provisions that prepare for the possibility of divorce, regardless of whether or not you consider divorce to be a possibility.

What Should I Do If I’m Going Through a Divorce?

For a number of reasons, many people fail to take these preventative measures. When a divorce is imminent or in-progress, it is essential to consult a business lawyer along with a divorce lawyer.  It is not too late to protect your business—there are several strategies that can be used to limit the impact of a divorce on the parties and the business involved at any stage. An experienced business attorney can help to determine which method to choose, guide you and your business through the divorce, and draft any settlements, agreements, and contracts that will ensure that you don’t lose more than you should. Even when these steps have been taken, it is still important to use a business attorney to draft transfer documents, in order to alleviate future misunderstandings and problems when selling. Whether you choose to solve your business problems by co-ownership, a buyout, or by selling the business—or if you are completely unsure about what to choose—a business attorney can help you.

We Can Help

When business owners are going through divorce, they have a number of unique considerations and issues that should be discussed with an experienced attorney who focuses on business counsel. If you are currently going through a divorce, or you would just like to prepare yourself and your company for the possibility of a divorce, you can contact us with any questions by clicking here or by calling our office at 832.510.2900 to schedule a complimentary consultation.

Leave a Reply