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How is a Family Business Divided in a Divorce?

On Behalf of | Oct 3, 2023 | Divorce |

Divorce can be complex and emotionally challenging, especially when it involves dividing assets, including a family business. In Texas, all assets acquired during a marriage typically become part of shared community property, which may be divided during a divorce. However, there are exceptions, such as assets inherited or received as gifts, which generally remain separate property.

The Importance of Documentation

If you are a business’s sole owner and operator, it is crucial to have a written agreement that verifies it as your separate asset. Texas judges can also consider the financial and labor contributions you and your spouse made to the business. Documentation, such as receipts and income tax returns, can serve as evidence of each party’s contributions in terms of time and funding.

Understanding Equitable Distribution

Texas operates under equitable distribution regarding property division, which can confuse community property principles. Equitable distribution does not necessarily mean an equal split. Instead, a judge will aim to divide the property as deemed “just and right.” This decision considers various factors, considering both marital and individual financial circumstances.

Types of Property in a Divorce

In a divorce, the property typically falls into three categories:

Marital Property: Includes assets acquired by the couple during the marriage, such as a family business established during the union.

Separate Property: Consists of assets owned before the marriage or gifts and inheritances received individually.

Combination: Some property may transform from separate to marital due to the mingling of funds or assets during the marriage.

Treatment of Property During the Marriage

How you and your spouse manage property during your marriage plays a crucial role in its classification during divorce: how you acquire, handle, and utilize assets together. These factors significantly impact the property division process during divorce proceedings.

Dividing a family business during a divorce in Texas involves carefully considering various legal aspects, including community property, separate property, and equitable distribution. It is essential to have an attorney who can provide guidance and ensure that you protect your rights and interests throughout the process. While divorce can be emotionally challenging, understanding the legal framework can help you make informed decisions and achieve a fair resolution.