You have always dreamed of owning your own business, and you finally made that dream come true. You put your heart and soul into building it and are passionate about its success. But the thought of a divorce threatens to take that all away. Can you do anything to protect your business from future threats, including the end of your marriage?
The answer to that question won’t be known until you sit with a knowledgeable family law attorney to discuss your unique situation. While you may have started the business on your own and your spouse never had anything to do with it, anything acquired during the marriage will likely belong to both parties. Texas is a community property state, and only a business formed before the marriage can be considered separate.
That said, protecting your business from divorce is possible in certain situations.
You Might Be Able To Protect Your Business If …
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You have a pre- or postnuptial agreement.
If you plan to marry and want to protect your business in case of divorce, consider a pre-marital agreement (also known as a prenup). These documents (as well as postnuptial agreements) are designed to put specific rules in place so that potential disputes can be resolved and potentially avoided entirely. Protecting your business will be at the top of your mind, but having one of these documents in place will also protect your spouse from the burden of business debts if a divorce happens.
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You kept personal and business finances separate.
The best way to make the case for holding onto your business is to keep your business and personal finances separate. When you start paying bills for one with funds from the other, you complicate matters and make it appear like this is a joint endeavor. Always use separate bank accounts, credit cards, and financial statements for your business.
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You broaden your scope of protection.
If you have business partners, it’s important to consider what will happen to your business during your divorce. To do this, consider having an agreement (buy-sell agreement, shareholder agreement, operating agreement, etc.) that specifies how ownership interests will be handled if a divorce affects you or another partner. You could include a provision that allows you to buy out your spouse’s interest if necessary.
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You minimize your spouse’s involvement.
Another tip to further protect your business from divorce is to minimize your spouse’s role in the business. This may be easier said than done for many family-owned companies. That said, you could avoid giving your spouse an official role and refrain from paying them from the business if they are not actively working with and for you.
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You negotiate your divorce terms strategically.
Not every divorce is contested or involves spouses trying to one-up or destroy each other. If you are on good terms with your spouse, discuss different ways to address property and assets in your marriage so that everyone wins and can walk away feeling good about everything.
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Consult an attorney proficient in family and business law.
It goes without saying that when faced with divorce, you should consult an attorney. That said, an attorney with expertise in family law and business law will help you create a strategy that gives you the best possible protection for your circumstances.
Many people dream of owning their own business. It becomes their life and legacy, and protecting it is a priority. It is almost certain you did not plan on divorce, but life happens. Make sure you are ready for what divorce can mean to the business you built. And take steps to protect that interest.
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Please consult an attorney for advice about your situation. The material on this website and in this or any blog article we publish are for informational purposes only. And do not constitute legal advice. The attorneys at Christman | Daniell Attorneys believe in tailoring legal advice and solutions to your circumstances.
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