It is likely that as young, star-crossed lovers you did not sign a prenuptial agreement. It is very common, and a hindrance for divorcing business owners. This is especially true for business owners in Texas. Texas is one of the small set of states that are considered community property states. This means that any assets acquired during marriage are considered “community property” between you both. This includes your business.
Technically in Texas any assets acquired before marriage are considered personal property. So if you started your business before getting hitched then you might think you are in luck. You will likely still owe your ex because all business earnings and debt acquired during marriage are considered community property.
Protect your future with a plan
If you do not plan carefully then the end result of divorce could be that your ex is your business partner or they might try to sell the business all together. Or in a worst case scenario you can lose your business completely to your ex-spouse. If you take careful steps early then you can minimize the damage to your hard earned business. Consider the following tips to keep your business safe through a divorce.
1. Keep family finances separated
Make sure to separate family finances from business finances. The more they mingle the more your business becomes a family property. For example do not dip into your joint savings account to buy a floor renovation for your business.
2. Minimize your spouse’s role
If your spouse handles responsibilities in the business then try to minimize their role. The smaller their role in the company the less ground they have to stand on during divorce proceedings. If they are an essential part to keep the business running then consider that you might owe them a stake in the business anyway.
3. Pay yourself well
It is common for business owners to sacrifice a chunk of their salary and reinvest it into the business right away. This is especially common for smaller businesses trying to stay afloat. That extra salary would have become joint property with you and your spouse. If you cheat your partner out of their fair share then they can later argue that they deserve a larger sum of the business in divorce. Avoid this by paying yourself a competitive salary.
4. Decide what is more valuable
If you have cultivated your business during several years of your marriage then you will owe your spouse a good portion in divorce. Decide which assets are more valuable to you. You can sacrifice different items in turn for your business. You could give you spouse property, retirement accounts or investments instead of your business. It might be worth it if your business is growing.
If you are a business owner who is considering divorce then finding the right attorney will be an important final step. The divorce process is complicated, especially for business owners. Find an experienced attorney because your future business depends on it.