Can I Prevent My Spouse from Taking Half My Business?
Owning and operating your own business… being your own boss… it’s what most of us dream about. But it’s hard work, and it’s not for the 9-to-5 crowd. It can take years of sweat and toil to build a healthy, thriving business. And more often than not, you’re out there alone. Your spouse may know or understand little about how your business operates, how hard you have to work, and how much you put into making the business a success. But if your marriage ends, you can expect your spouse to want half of what you’ve created. Is that just the way it works? Are there steps you can take to protect your business assets in a divorce?
Community Property Laws in Texas
Texas is one of a minority of states that apply the “community property” concept to the division of debts and assets upon the dissolution of a marriage. Under community property law in Texas, all assets acquired during the marriage, with certain exceptions, are considered community property and must be divided equally between the parties.
One exception to the community property rule applies to any asset owned prior to the marriage and brought into the marriage by one of the parties. Such property is categorized as “separate property” and remains the property of the person who brought it into the marriage. Accordingly, if you started a business before you were married, it usually will be all yours after divorce. If the business didn’t exist until after your wedding, it’s community property. If the business existed before your marriage, but your spouse contributed to its growth, or you used marital assets to help build the business, there likely will be some community property component to the business.
Can You Still Keep Your Business If It’s Community Property?
Suppose you started a business after you were married, or your business expanded significantly because you used marital assets to build it. It’s then considered to be partially or wholly community property. That doesn’t mean, though, that you can’t keep the entire business after divorce.
Equal division of property applies to the value of the estate as a whole, not to individual items of property. Some property is easy to divide right down the middle—bank accounts, investment accounts, and other cash-type assets can all be split evenly without a problem. But other assets are not easily divided—a house or car, for example. To keep your business, you might have to be willing to give the marital home or other personal property to your ex, so that the total value of the estate is equally divided. For example, if your business is valued at $600,000, your home at $400,000 and you have an investment portfolio of $200,000, you may choose to give your spouse the home and the entire investment portfolio (including your $100,000) in exchange for full ownership of the business.
How Do You Put a Value on Your Business?
One of the key issues to resolve, should you seek to “trade off” other marital assets in order to keep your business, is the determination of the value of the business. Is it the bricks and mortar? Is it the goodwill? Is it the projected future revenue? Is it all of the above?
In a Texas divorce proceeding, the value of marital assets is determined by the finder of fact. In a jury trial, the finder of fact is the jury, and when there’s no jury, it’s the judge. In either instance, you and your spouse can (and probably will) both bring in experts to testify regarding the fair market value of the business, but that value ultimately will be decided by the court.
Contact the Divorce and Family Law Attorneys at Bailey & Galyen
At the law office of Bailey & Galyen, we offer a free initial consultation to every client. For an appointment with an experienced Texas divorce attorney, contact us by email or call our offices at 844-402-2992. We will take your call 24 hours a day, seven days a week.