When you are going through a divorce in Texas and own a business, the process of property division can be an extremely complicated. Under the Texas Family Code, Texas is a community property state for purposes of divorce and property division. In a community property state, assets and debts are classified as either separate property or community property. Community property is a term that refers to assets or debts that are property of the marriage, or the “community.” In many divorce cases in Dallas and throughout Texas, a business owned by one of the spouses will be classified as community property and will be subject to division. Ultimately, the value of that business can have a significant impact on the process of property division.
Your Business May Be Classified as Community Property
To understand whether the value of your business will impact property division in your Texas divorce, you should speak with a divorce attorney to determine whether your business is likely to be classified as separate or community property. For many Texans, a business is community property. If you opened the business after the date of your marriage, it will likely be considered community property and be divided. In contrast, a business owned before marriage can be separate property. Lots of factors are analyzed in determining if a business is separate property or community property, including capitalization, owner compensation, structure of the business documents, and many other variables.
You should know the value of your business also may be higher than you are thinking. Not only will the value of the assets owned by the business be part of the valuation, but other intangible assets of the business can affect its value. For example, even enterprise goodwill you built in your community through the business can be considered in connection with its value.
Even if Your Business is Separate Property, Its Value May Impact How the Court Divides Community Property
Only property completely acquired prior to the marriage, or property acquired during the marriage with separate assets or through a gift or inheritance will be considered separate property. Everything else will be community property. But even if your business is entirely classified as separate property, the judge may still consider its value in deciding how to divide community property.
While Texas is a community property state, courts do not divide community property in a simple 50-50 split between the spouses. Instead, according to the Texas Family Code, courts divide community property in a manner the court deems “just and right.” A court in Texas can consider many different factors when it is deciding what kind of a property division would be “just and right,” and one of those factors can be the value of separate property. Accordingly, if one spouse has a substantial amount of separate property in a valuable business, that spouse ultimately may be awarded a smaller percentage of the community property.
Contact a Dallas Divorce Lawyer
If you have questions or concerns about the distribution of your business in your divorce and the ways in which the value of that business may impact property division, you should speak with a divorce attorney in Dallas as soon as possible. Our firm serves clients in Dallas, Frisco, Fort Worth, and San Antonio. Contact Orsinger, Nelson, Downing and Anderson, LLP to learn more about how we can help with your case.