Divorce can be complicated, especially when a small business is involved. Ensuring the business is protected during a divorce requires careful planning and understanding of Texas family law. Here, we will discuss how to protect your small business during a Texas divorce, focusing on the Texas Family Code and its impact on families.
For personalized advice, please contact Attorney Tyler Monahan, partner at Turner-Monahan, PLLC, to discuss your case.
Understanding the Texas Family Code and Its Impact on Families
The Texas Family Code is a set of laws that governs family matters in Texas, including marriage, divorce, and child custody. It impacts families by providing the legal framework for resolving disputes and ensuring fair treatment for all parties involved. In the context of divorce, the Texas Family Code outlines how assets, including businesses, should be divided.
Section 3.002: Defines community property as any property acquired during marriage, except for gifts or inheritance.
Section 7.001: States that community property is subject to just and right division, considering the rights of both parties.
Section 7.002: Allows the court to consider various factors, including the nature of the property and each party’s contribution to its acquisition, when dividing community property.
Steps to Protect Your Small Business
1. Prenuptial and Postnuptial Agreements
One of the best ways to protect your business is to have a prenuptial or postnuptial agreement in place. These agreements can specify how the business will be treated in the event of a divorce.
Prenuptial Agreement Lawyer: Consult a prenuptial agreement lawyer to draft an agreement before marriage. This can help ensure that your business remains your separate property.
Postnuptial Agreement Services: If you’re already married, a postnuptial agreement can still provide protection. For instance, if you start a new business during the marriage, a postnuptial agreement can clarify that the business is your separate property.
2. Keep Business and Personal Finances Separate
Ensure that your business finances are kept separate from your personal finances. This helps establish the business as a separate entity, which can be crucial in protecting it during a divorce.
3. Pay Yourself a Competitive Salary
By paying yourself a competitive salary, you demonstrate that the business is a source of income rather than a marital asset that requires division.
For example, if your business generates significant profits but you only take a minimal salary, the court may view the retained earnings as part of the marital estate. Paying yourself a fair salary helps show that the business income supports the household, reducing the risk of the entire business being subject to division.
Division of Business Assets
During a divorce, the court will divide marital assets. Understanding how this process works is crucial for protecting your business.
Divorce Asset Split: The court will determine how to split business assets based on the Texas Family Code‘s just and right division principle. This means that even if the business is considered community property, you may be able to keep the business while your spouse receives other assets of equal value.
Marriage Asset Division: Similar to other assets, the business will be divided based on various factors, including each spouse’s role in the business. If your spouse had no involvement in the business, you might be able to negotiate to keep the business in exchange for other marital assets.
For example, if you and your spouse both worked in the business, the court may decide that the business should be sold and the proceeds divided. However, if you were the sole operator, you might be able to argue that you should keep the business in exchange for giving up other assets.
Considerations for Business Owners
1. Business Valuation
A professional valuation of your business is essential to determine its worth and how it should be divided.
2. Buyout Options
If the business is considered community property, you may have the option to buy out your spouse’s interest.
3. Protecting Intellectual Property
Ensure that intellectual property and trade secrets are adequately protected to prevent them from being considered marital assets.
Discuss Your Case With Turner Monahan, PLLC: Your Advocates in Difficult Times
Protecting your small business during a Texas divorce requires careful planning and a thorough understanding of the Texas Family Code. By taking proactive steps, such as drafting prenuptial or postnuptial agreements and keeping business finances separate, you can safeguard your business.
Turner Monahan, PLLC, with its experienced attorneys, can provide the legal support you need to navigate this challenging time. Schedule a free, no-obligation consultation with attorney Tyler Monahan to discuss the details.
Disclaimer
The commentary and opinions are for informational and educational purposes only and not to provide legal advice. You should contact an attorney in your state to obtain legal advice concerning any particular issue or problem. You can become a client and enter the attorney-client privilege only after hiring Turner-Monahan, PPLC, by signing a written retainer agreement.
