Is all of your business community property?

In Texas, business assets can be categorized as community property, which is divisible between divorcing spouses. To arrive at a fair distribution of these assets, you will typically need legal counsel with the resources to accurately valuate the business. Those resources may include access to CPAs and experienced business appraisers.

The history, current value and future value of the company are key factors in determining how business assets should be divided. Additionally, what are the tax implications? When you consider all of these factors, you may have a few options:

  • Negotiating to acquire your spouse’s share of the business
  • Selling your share
  • Selling the entire company and splitting the proceeds
  • Proving that your spouse doesn’t have a right to business assets

From the start, it is important to determine whether business assets are community property or separate property.

Texas law states that property acquired by either spouse during the marriage is community property, and separate property consists of property owned by one spouse prior to the marriage. Separate property, which can be kept out of property division, could also be gifts acquired by only one spouse or compensation for personal injury to one spouse.

In many cases, one spouse started a business before the marriage, and it is possible to show that the value of the company on the marriage date is in fact separate property and thus not subject to division at divorce.

However, any appreciation in the value of the business will likely be subject to division.

If you or your spouse owns a business and you’re planning to end the marriage, then you need a legal professional on your side to protect your short- and long-term financial interests. Setzer Law Firm, PLLC, works to protect the property rights of spouses going through high net worth divorce.