Divorce for Business Owners in Houston

Houston Business Owners Divorce Lawyer

If you’re going through a divorce, and you’re a business owner, it adds a layer of complexity to an already complicated process. Owning a business is a labor of love, and including that business in the division of your marital property is never easy. Some considerations, however, can help you streamline your efforts and ensure that your business continues to thrive throughout your divorce process and into the future.

Private Property vs. Marital Property in Texas

If you enter into a marriage as a business owner, the business is your private property. If, during your marriage, that business becomes a family business or becomes mingled with your family finances, it complicates the matter considerably. Owning a business within a marriage can happen in a variety of ways:

  • One of you owned the business when you married
  • The business owner kept the business separate throughout your marriage
  • The business owner commingled the business with your marital property during your marriage
  • One or both of you started the business during your marriage

Any of these scenarios can complicate the court’s decisions regarding the division of your marital property (if you and your divorcing spouse can’t come to terms upon which you both agree). Working closely with an experienced Houston divorce attorney is always in your best interest in a complicated divorce involving a business.

Texas Postnuptial Agreements

Prenuptial agreements have lost much of their historical stigma and have become far more common—especially in marriages between older, more established partners, including business owners. However, if you didn’t implement a prenup before your marriage, you might want to consider a postnuptial agreement.

If divorce is already on the horizon, such a contract isn’t an option, but if you’re married and own a business, a postnuptial agreement might be a good fit. This legal instrument isn’t an indictment of your marriage but, instead, is a mechanism for keeping each of your properties separate – and streamlining the division of marital property if your marriage does end in divorce.

Keep Your Business Separate

If you bring a business into your marriage, and you want that business to remain your separate property, you must keep your business transactions separate from your family’s financial affairs. This is often easier said than done. Many business owners finance their phones, cars, and home offices through their businesses. While these may be valid business options, such financing will not help your cause if you intend to show the court that your business is your separate property. In general, separate property must be kept separate to retain that designation.

Keep Your Records Clean

Running a business is a lot of work, and we’re all prone to cutting corners when life heats up. However, it’s important to be fastidious when keeping the books for your business. By taking the extra time necessary to keep your books clean and separate from your family’s financials, you help establish that your business is your own.

Valuing Your Houston Business

If you’re facing a divorce and own a business, you will need a business valuation, and this is where things can get tricky. You and your divorcing spouse can pursue a valuation together, but agreeing on the final number can become problematic. A more expensive route is to obtain your valuations. Because business valuations are a somewhat standardized practice, your results should be similar. In practice, however, valuations don’t always work out this way. Ultimately, obtaining a valuation you are both willing to sign off on can be extremely arduous.

Be Transparent

The last thing you want to do if you’re facing the division of your marital property and you own a business is an attempt to downplay the value of that business. The court does not take kindly to hiding assets in a divorce, and your first obligation is to be transparent regarding your financials. While you don’t want a valuation that overestimates your business’s worth, you do want a valuation that accurately and conservatively reflects its value. Work closely with your valuation expert to ensure the result is a fully transparent snapshot of your business financials.

Your Business: The Emotional Component

If you own your own business, you have a strong connection to that enterprise. After all, you’ve poured your life’s blood into its creation. If you’re facing a divorce, you’re not only facing the dissolution of your marriage but also uncertainties regarding your business. The fact is that divorce is both an emotional and financial strain, and it’s going to negatively affect every part of your life, including your business.

The emotional upheaval inherent to divorce may affect your ability to focus on your business in the way that you’re used to doing (at least in the short term). Your business will take a hit in your divorce, but focusing on moving forward with purpose and with the professional legal counsel of an experienced Houston divorce attorney will help.

Houston Family Business

If your business is a family business – whether it was a separate property that morphed into a family business or you began it together – it complicates the matter considerably. If you and your divorcing spouse were employed by the business, agreeing to its just and right division can be especially vexing and fraught with emotion. In the end, one of you will likely have to walk away; in such cases, careful negotiations are imperative.

FAQs on Divorce for Business Owners in Houston

Is my wife entitled to half my business if we divorce in Texas?

In Texas, which follows community property laws, both spouses are generally entitled to an equitable distribution of all marital assets, including businesses. However, equitable does not necessarily mean equal. Whether your wife is entitled to half your business depends on various factors, including whether the business is considered community property or separate property. Your wife might be entitled to a substantial share if it was started or significantly grown during the marriage.

How is an LLC treated in a divorce in Texas?

An LLC is treated like any other business in a Texas divorce. If established or its value significantly increased during the marriage, the LLC interest may be considered community property subject to equitable distribution. However, if it was created before marriage and remained separate, it might be considered separate property. Courts will examine various factors, such as the source of initial capital, contributions from both spouses and how the business was managed.

Can my ex-wife take half of my business?

Your ex-wife may not necessarily take “half” of your business, but she may be entitled to a significant portion of its value. Courts aim for a fair division based on community property laws, considering each spouse’s financial situation, contributions to the marriage, and the needs of any children. The court might award your spouse other marital assets or a monetary settlement equivalent to their share of the business.

Are business assets community property in Texas?

Business assets may be considered community property if they were started or significantly developed during the marriage. If you started the business before marriage but used marital funds or your spouse contributed to its growth, some or all of your business assets might be classified as community property.

How to protect your business from divorce in Texas?

To protect your business from divorce in Texas:

  • Prenuptial/Postnuptial Agreements: Draft a clear agreement specifying the business as separate property.
  • Operating Agreements: Include buy-sell provisions that restrict the transfer of business interests.
  • Proper Record Keeping: Maintain separate financial records for the business to distinguish community and separate property.
  • Fair Compensation: Pay yourself a fair salary to prevent claims of community property contributions to business growth.

Are separate bank accounts marital property in Texas?

Separate bank accounts may be considered marital property if community funds were deposited or if both spouses contributed to the account. Even if you keep funds in a separate account, the source of those funds determines their classification as community or separate property.

Can I remove my spouse from my LLC?

Removing your spouse from an LLC can be challenging and depends on the operating agreement and structure of the LLC. If your spouse has an ownership interest, you may need to negotiate a buyout or agree on other terms through mediation or court. An experienced divorce attorney can help navigate the process.

What is a wife entitled to in a divorce in Texas?

In Texas, a wife is entitled to an equitable share of community property, which includes marital assets acquired during the marriage. Courts consider various factors when dividing property, such as each spouse’s financial situation, education, earning capacity, health, and contributions to the marriage.

Are a husband and wife considered one member of an LLC in Texas?

No, a husband and wife are not automatically considered members of an LLC in Texas. The operating agreement and individual contributions determine ownership interest. Each spouse is considered a separate member if they hold ownership interests in the LLC.

What To Do Next

If you’re a Business Owner Who’s Facing Divorce, Consult with our Experienced Houston Divorce Attorney Today

There’s no way around it – owning a business will complicate your divorce. The dedicated legal team at The Rudisel Law Firm, P.C., in Houston, is committed to helping you every step of the way. Your business is important, and our experienced divorce attorneys have the skill, knowledge, and determination to help guide your case toward a resolution that works for you. For a free consultation, please contact or call us at 713-781-7775 today.