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Dividing a business during a divorce

On Behalf of | Aug 13, 2022 | Property Division

Divorce is never easy. But when one or both partners own an interest in a business, the process can become even more difficult.

Texas follows community property laws. This makes dividing assets particularly complicated.

What is community property?

Community property laws in Texas state that property acquired by a couple during their marriage is equally owned by both spouses. This includes a business, even if one spouse founded it without the other; in the eyes of the law, both spouses hold equal interests.

Some parameters may designate a business as separate property, but the required proof is strict.

How does Texas determine if a business is community or separate property?

The courts begin by establishing certain facts. The facts include:

  • Dates of marriage and founding of the business
  • The type and source of funds used to start and run the business
  • How much each spouse contributed to the business during the marriage

The court will use this information to make a determination. The three most common outcomes are:

  • Separate property: Businesses founded before the date of the marriage by only one spouse. However, the court may consider assets and income acquired from the business while married as community property.
  • Community property: Business is jointly owned by both spouses. The court will try to avoid destroying the business when dividing assets; co-ownership after the divorce is a possibility.
  • Community property: Business launches during the marriage with joint funds, even if by only one spouse.

Dividing a business as a marital asset during divorce is a complicated and emotional process that will require patience and expertise to handle.