Helping You Through The Most Painful Details Of Your Divorce

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What happens in divorce if you run a company with your spouse?

On Behalf of | Nov 14, 2022 | Family Law

Every couple considering divorce will have to make difficult choices about their property. The more valuable your assets are, the harder it can be to divide your belonging with your spouse. Houses and retirement accounts frequently lead to disagreements in divorce proceedings. Businesses owned and run by married couples can be even more valuable than real estate holdings and retirement savings combined.

Fear about what might happen to your business if you divorce might leave you feeling trapped in a miserable marriage. What do the Texas community property rules mean for those thinking about divorce despite owning a business?

You may have to divide the company’s value

The property that the two of you add to the marital estate belongs to both of you, whether it is increased business value or the income of one spouse. If the two of you negotiated a marital agreement, possibly because you intended to start a business together, then the terms of that contract will dictate the process of dividing the business. Otherwise, there are likely several steps you will have to take to address your family business in the divorce.

You will make key decisions about the future

One of the most important choices when addressing a family-owned business in a Texas divorce is whether or not is possible for both spouses to continue working at the company or share an ownership interest following the divorce.

Often, couples feel that continuing to work together will not be an option. If you do attempt to work with one another in the future, you may need to draft contracts very carefully exploring the different challenges that will arise in that scenario. Sometimes, spouses will agree between themselves which one should continue working at or owning the business.

When one spouse retains the company, they will typically need to secure a professional valuation and designate an appropriate amount of property to their ex in the property division settlement. Spousal support may also be a consideration in a scenario where one spouse leaves their job at the company and will need to transition to a different career.

What if spouses don’t reach an agreement?

Sometimes, handling the company business is a straightforward process because one spouse feels passionately about it and the other does not. Other times, it becomes a major source of conflict. The two of you could potentially attempt mediation as a way of negotiating your own settlement when you can’t seem to see eye to eye on your own.

Otherwise, you may have to litigate. A judge can decide what to do with the business in accordance with Texas’s community property law and your family situation. It is effectively impossible to predict the exact outcome of property division proceedings when a couple goes to court. Identifying the issues you have to handle to effectively divide your business can help those preparing for the early stages of a Texas divorce.