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What will happen to the family business when you divorce?

On Behalf of | Apr 18, 2023 | High-Asset Divorce |

You may be uncertain about the future of a family-owned enterprise when you part ways with your spouse. Will it be business as usual or do you have to close the shop? The answer to your questions may not be straightforward, as explained below.

There is no blanket law that specifies what will happen to family businesses in Texas after divorce since every situation is unique. As such, the fate of your family business will depend on the prevailing facts. Here is what you need to know.

Is the family business considered marital property?

Suppose you started the business after the marriage, using marital funds or alongside your spouse as co-owners. In that case, it is considered marital property and will be up for division when you divorce. 

It is worth noting that a spouse does not necessarily need to be an employee or directly involved in running business operations for it to be considered marital property. Your spouse may be legally entitled to a stake in the business if they supported you as a homemaker or cared for the children while you ran and managed the business.

What are your options?

If you do not have a valid prenup that outlines what should happen to the family business, you have these options:

  • Sell the business and divide the proceeds with your spouse
  • Buy out your spouse and retain the business
  • Run the business with your ex as co-owners

It all depends on whether you can reach a mutual agreement with your spouse on the way forward. Otherwise, the court will decide how things will proceed.

Protect your financial interests during divorce

It is crucial to have the proper guidance when navigating the complexities of a divorce. Learning more about how everything works, especially from a legal perspective, will help you understand your options and ensure the best possible outcome for your family business.