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Mine, Yours, or Ours: Is my Spouse Entitled to Half my Business?

It is never easy to divorce. If the couple or one spouse has their own small business, it can make matters even harder. Determining ownership after divorce can be complicated.

It is possible you have experienced all the emotions and events associated with starting and having a small business, whether you started your business before you got married or at some time during your marriage. Unfortunately, some marriages end in divorce, and if this happens to you, it can result in your small business having an uncertain future.

Rights to Business

It is a challenge to operate a company if its future ownership is uncertain. Depending on circumstances, a business owner may or may not have full rights to the business in a divorce. Determining business ownership could make a divorce very complicated.

Community Property Law

This will play a significant role in determining control of a business after a divorce. Texas is a community property state. This means all property obtained or earned by either marriage partner during the marriage is owned by each marriage partner at 50 percent. All assets should be divided at 50 percent between the couple. The exceptions are property obtained as part of an inheritance as well as a gift designated as separate property. It also applies to property owned before the couple is married.

Before Or After Marriage

A key element considered when ownership of a small business is determined in a divorce is whether the company was started before the marriage or after it. Should a business be started prior to a marriage, it could be treated as separate property. Should income from the business be used in the marriage, it would be considered community property.

Company Operation

There are situations where the creation of a business prior to a marriage will not determine business ownership. When one spouse involves the other operate the business during the marriage, it could cause the company to be designated at community property. Should one partner help the other run the business, maintain it as well as help it grow, they could be entitled to a portion of it should the couple divorce.

Prenuptial Agreement

Some business owners will ask their future spouse to sign a prenuptial agreement prior to marriage to protect ownership of their business. A family law attorney will know how to draft a legally sound prenuptial agreement. This agreement will have to be in writing and be deemed within reason. It should be voluntarily executed by the spouse who signs it. No coercion should be involved.

Business Partner

When a business partner is involved with a business where the other partner is getting a divorce, it could cause things to get complicated. In this situation, the valuation of the business will be essential. It will be given a valuation based on the company's profits and assets at the time a couple decides to divorce.

It will be important to have a paper trail establishing a business partner is truly invested in the company. This will avoid the appearance of a partner being a way to keep a company from being divided in an impending divorce.

A divorce can be a difficult experience, it can be especially challenging when a business is involved. Each spouse will want to protect what they view as their rights to the company. When a business owner decides to get divorced, there are certain things they need to consider.

Speaking with a family law attorney could help make the process easier. The legal professionals at Benouis Law have experience helping business owners and their spouses through the divorce process, and we can help you through yours.

Contact our firm at (512) 213-6779 to discuss your case today.

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