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How can I protect my business from divorce?

On Behalf of | May 17, 2023 | High-Asset Divorce

Business owners may find themselves facing unique considerations during divorce. In addition to ending a personal relationship they will also have concerns about how the divorce process will impact their business.

The following provides information on the three main steps that will occur that involve the business during divorce negotiations.

#1: Business ownership

The first step is to clarify who owns the business or business interest. If the business was started during the marriage or the business experienced significant growth during the marriage the courts may consider it marital property. That means the interest in the business could be subject to division during divorce.

#2: Business valuation

Next, the court will need an estimated worth of the business. It is generally wise to have an independent party with experience appraising businesses in a similar industry provide a business valuation.

#3: Property division

Finally, the division of assets. Certain legal documents may guide this portion of the divorce. Two common examples include:

  • Premarital agreement. Also known as a prenup, the individuals enter this legal agreement prior to the marriage. It can include instructions on the division of certain qualifying assets like business interests.
  • Postnuptial agreement. Like a prenuptial agreement, a postnuptial agreement also addresses division of assets, but the individuals enter the agreement during the marriage.

If these documents are not present, the parties to the divorce will negotiate a split of the marital assets. Texas is a community property state. This essentially means state law views all assets acquired during the marriage as marital property and requires the divorcing couple divide the assets equally.

If the business is a marital asset and the business owner wishes to maintain full ownership, they could offer another asset of equal value in exchange. This could include real estate or retirement assets.

This is just one potential strategy to help retain full ownership and minimize the impact of the divorce on business operations. It is important to discuss this and other options to protect your interests during the divorce and mitigate the risk of any surprises after the divorce is finalized.