Texas is a community property state. This means that if a business owner becomes involved in a divorce, the other spouse may be entitled to a portion. In order to avoid this eventuality, the owner may want to take certain measures to retain his or her interest in the business as separate property, which would then not be subject to division in the divorce.
First, if a Texas business owner is not yet married, it would be a good idea to negotiate and execute a prenuptial (before marriage) agreement. This way, the business and/or any interests in the business can be identified as separate property. If a couple is already married, it may be possible to execute a post-nuptial (after marriage) agreement to keep the business separate.
Of course, this is contingent upon the owner of the business keeping the business finances separate from the marital finances. This may include ensuring that the business pays the owner a competitive salary to avoid the perception that the owner put money back into the business that should have gone into the household. This could cause a court to determine that some portion of the business could go to the other spouse.
Keeping a business separate may not be as easy as it sounds. Failing to understand the rules could result in all or part of the business becoming a divisible asset in a divorce. Many entrepreneurs consult with a business law attorney when they start a new venture, but married entrepreneurs may want to consult with a family law attorney as well.
Source: Forbes, “Why a Prenup May Be A Woman Entrepreneur’s New Best Friend“, Jenny Odegard, Aug. 2, 2017
