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Protecting one's business in divorce

Getting divorced in Texas can be a particularly difficult process for those who own their own businesses. Business owners going through divorce likely have concerns about how the process will affect their companies since the business represents countless hours of hard work and commitment as well as significant financial investments. The following details several options a business owner has available to shield him or her from losing too much during the process.

Since Texas is a community property state, the courts will split all property 50-50, or as close as possible. Unfortunately for business owners, one of the protections they could use to shield their businesses from division is a prenuptial agreement, which would have had to occur well before the couple got married. Post-nuptial agreements are also an option; however, the courts typically view the agreements with greater scrutiny.

Another option is that business owners can set up their businesses as a partnership or limited liability company. During the process, shareholders can include provisions that will protect themselves and cover various scenarios, including how company shares, assets, etc., will be handled should one of the partners divorce. A business owner would also do well to limit his or her spouse's involvement in the business because the court may deem that spouse entitled to a percentage of the company.

Should none of the options work for a business owner, he or she can simply try to buy out the other spouse. One way to do this is to use capital from other areas, such as stocks, retirement funds, real estate, etc., to reimburse the spouse for his or her share of the company. A business owner can also use a property settlement note to pay off the other spouse over time, usually with interest. Spouses also have the option to sell the business and divide the proceeds; however, if one is trying to salvage his or her company, this may not be the best option.

Because of the various factors and complications involved, business owners in Texas who are going through a divorce should consult with a family law attorney to better understand their options. An attorney can explain the laws of the state and the chances a client has at realistically obtaining his or her goals. In all cases, an attorney will work to protect his or her clients' rights and interests at all stages of the process.

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Vernier & Associates, PLLC Vernier & Associates, PLLC

Vernier & Associates, PLLC
2441 High Timbers Drive Suite 110
The Woodlands, TX 77380

Phone: 281-882-3271
Fax: 832-585-0955

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