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Is A Business Community Property Or Separate Property In Texas?

Divorce16

Ending a marriage is not an easy thing to do. Untangling legal, financial, and personal affairs can be complicated. For business owners, a divorce can be even more difficult. You have to worry about protecting your company. This raises an important question: Does my business count as community property when getting divorced in Texas? The answer depends on a few different factors. In this blog post, our Houston and Galveston County divorce lawyers provide a guide to business ownership and the community property standard in Texas.

Divorce: Texas is a Community Property State 

Texas is one of nine community property jurisdictions in the United States. The Texas State Law Library describes the community property standard as a system under which “any property acquired by a couple during their marriage (with a few exceptions) is equally owned by both spouses.” Here is what this means for your business:

  1. A business started during the marriage with support from joint funds is likely to be deemed community property; and
  2. A business started before the marriage (or with funds kept clearly separate) might be deemed individual property.

If you want to claim a business as wholly separate property during your divorce, you have to prove that no marital assets were used to support the company. Even then, if the business grew by a large amount in value during the course of your marriage, a portion of the business may be classified as community property. Get yourself organized and seek a comprehensive business valuation. With all information in hand, you will be in the best position to get through your divorce case without suffering avoidable financial or professional hardship.

Caveat: If a business is protected by a legally valid prenuptial agreement or postnuptial agreement, that could prevent it from being deemed community property. Though, prenup/postnup cases can be complicated. A divorce lawyer will review your agreement and help you navigate the separation.

Collaborative, Low Conflict Solutions Can Benefits Business Owners Going Through a Divorce

 Whether or not your company is community property depends on when it was founded, how it was funded, what prenup/postnup agreements are in place, and if the value increased significantly during the marriage. In any event, business owners do not want to get locked into a difficult, protracted divorce battle that could potentially cause financial damage to their company.

For this reason, collaboration and mediation often provide an effective path forward for business owners who are ending their marriage. When possible, an experienced Texas divorce lawyer will help you work towards an agreement that spares your business from any harm and fully protects your personal financial interests.

Contact a Divorce Lawyer in Houston or Galveston,TX

At Lindamood & Robinson, P.C., our Texas family law attorneys have the skills and expertise to represent business owners and their spouses in divorce proceedings. If you have questions about community property, we will help. Call us at 713-654-2112 in Houston, 281-486-6116 in Galveston County, or send us a message online to set up a confidential appointment with an attorney.

Resource:

guides.sll.texas.gov/community-property

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