What happens to our business when we get a divorce in Texas?
When getting a divorce in Texas and own a business, here are things you need to know! Texas is a community property state, what does that mean?
Texas is one of nine states that is a community property jurisdiction. In general, this means that any property acquired by a couple during their marriage (with a few exceptions) is equally owned by both spouses. This can have a profound effect on the dissolution of property during divorce proceedings. Source
When couples file for divorce, both the community property and marital debts must be split. When the term “community property” is used, it is often presumed that this relates to items such as the marital home, vehicles owned by the couple, assets within the marital home, vacation homes, and bank accounts. Those items certainly do fall within that category in most instances. Another asset that may or may not be categorized as community property is business ownership or an interest in a business.
Divorce can affect your business because it may be seen as a community property or quasi-community property. In short, your soon-to-be former spouse may be legally entitled to a portion of your business or business interest. Often, it is best for business owners to prepare for this possibility in advance of getting married, although that’s not always possible. Businesses started by one person, not with their spouse, before the marriage is generally treated as separate property.
Quasi-community property in Texas as it relates to business (or any other sort of asset) that is separate property and is treated as community property. This could result in what feels like unfair treatment of the business owner because they’re required to split their business and its assets with their former spouse.
For individuals that decide to start a business while they are married, the divorce process may cause concern since the business may need to be validated to determine its worth.