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How will community property division impact a family business?

On Behalf of | Jul 12, 2023 | Divorce

Starting a small business is a great way for someone to support their family in Texas. Professional practices, lawn care services and even small retail shops can improve a family’s standard of living and give the owner or entrepreneur control over their daily schedule. However, running a small business can easily strain someone’s marriage by demanding too much of their time. Spouses may also feel very nervous about what would happen if they were to divorce.

Those who understand the Texas community property division process and who are proactive about protecting themselves may be able to reduce their worries about the negative impact a divorce could have on their small business.

Will the business itself be at risk?

One of the main reasons that people worry about property division affecting a business is that the company is probably their primary source of income. If they have to sell it or divide it, that might mean that they either have to start a new business or find a job somewhere.

Although community property rules do generally require that spouses divide assets acquired during marriage, they don’t have to actually split every asset in half. While the liquidation of the business is an option, it may not be the approach chosen by a couple or the judge presiding over their case. Instead, the business’s value may influence the division of other resources.

It is possible for one spouse to retain both ownership and management of a company in a divorce if they make concessions in other areas of property division. In some cases, such as when there is an airtight prenuptial agreement or ownership records that help establish the company as separate property, the business may not be at risk of division or may only have a small portion of its value in play during property division proceedings.

Those who worry about losing control of their business or being unable to support themselves financially because of a divorce may have an incentive to negotiate a settlement with their spouse early in the process to retain control over the outcome. Learning more about community property rules may help people feel empowered as they prepare for divorce proceedings in Texas.