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Preserving ownership of a business during a divorce

| Feb 13, 2021 | Property Division

Without proper planning, a Texas divorce may end with two spouses dividing all of their assets in half, which includes stocks or ownership interests in a company. A business started during a marriage generally becomes community property unless a written and signed agreement clarifies it as an individual’s separate asset.

As described by Business.com, an owner who wishes to exclude an enterprise from a divorce settlement may do so through a postnuptial agreement. An amicable agreement drawn up during the course of a marriage may separate a couple’s assets without a divorce court’s interference.

Maintaining full ownership of a marital-property business

Under Texas community property laws, businesses may split evenly between spouses as part of a judge’s order. Even when a spouse did not contribute to a company’s startup or funding, he or she may leave a marriage with half of its ownership.

A working individual who committed capital and sweat equity to a business may not wish to see half of it go to an ex-spouse. Giving up his or her portion of other shared marital assets, such as a house, could serve as a means to maintain sole ownership.

Buying out a spouse for his or her half of a business

Obtaining a third-party valuation of an enterprise provides a fair market value that acts as a reasonable opening offer when negotiating a buyout with a spouse. As noted by WealthManagement.com, a professional business appraiser may interview management and review financial records to provide an accurate valuation.

Some business owners may find that buying half of a company from a soon-to-be ex-spouse represents a viable solution. Under the right circumstances, a trade of assets may take the place of cash. Other business owners may, however, prefer a proactive approach and work out a postnuptial agreement for an enterprise that began during a marriage.

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