In a Texas divorce, a business you own is presumed to be community property unless you prove it is separate, and the court values your ownership interest, not the company’s assets, at fair market value, leaving out goodwill that depends on you personally. Most owners keep the company: the other spouse receives other assets of similar value, or a secured buyout paid over time. While the case is pending, the court can enter orders on who runs the business and how its money moves.
First question: whose company is it?
Texas starts with a presumption: property either spouse has when the marriage ends is community property unless a spouse proves it is separate by clear and convincing evidence (Tex. Fam. Code § 3.003). Separate property includes what you owned before the marriage and what you received by gift or inheritance (Tex. Fam. Code § 3.001).
For an owner, that becomes three practical questions:
- When and how was the company formed? A company started during the marriage is presumed community. One formed before the wedding with your own money supports a separate-property claim, but you prove it with paper: the certificate of formation filed with the Texas Secretary of State, early bank statements, the original operating or shareholder agreement and the first tax returns.
- What exactly do you own? If the business is an LLC or corporation, the marital estate generally holds your membership interest or shares, not the company’s trucks, receivables or bank accounts. The dispute is usually about what that interest is worth.
- Did marital effort grow a separate business? If time, toil, talent or effort enhanced separate property beyond what was reasonably necessary to manage and preserve it, and the community was not adequately compensated, the community estate can have a reimbursement claim (Tex. Fam. Code § 3.402). An owner who paid themself far below market while the company’s value climbed should expect this argument.
Once character is settled, the court divides the community estate "in a manner that the court deems just and right" (Tex. Fam. Code § 7.001). That standard does not require an equal split.
What the business is worth, and how it is measured
Texas divorce courts generally value a business interest at fair market value: what a willing buyer would pay a willing seller, neither forced to act and both knowing the relevant facts. That standard matters because it excludes value that would not transfer to a buyer.
Goodwill is where it matters most. In Nail v. Nail, the Texas Supreme Court held that goodwill tied to a professional’s personal skill and reputation was not divisible property. Courts since then separate that personal goodwill, which stays with you, from enterprise goodwill that would remain with the business if you left. For a dental practice in Allen, an accounting firm near Legacy West or a consultancy whose clients follow the founder, that line can be most of the dispute.
Valuations are built from documents. Expect requests for business tax returns, general ledgers, bank and merchant-processing statements, payroll records and any loan applications or personal financial statements you gave a lender. A value you stated to a bank last year is hard to walk back in a deposition. Valuators then adjust the books toward economic reality: personal expenses run through the company are added back, and your salary is compared with what the company would pay someone else to do your job. Our post on business owner interest valuation and division in divorce covers the methods.
Each spouse can hire a valuator, or you can agree on one neutral valuator. A joint valuator usually costs less and narrows the issues; separate valuators make sense when you are far apart on value or trust. We coordinate valuators, forensic accountants and tracing work as a case requires.
Keeping the company running while the case is pending
Once a Collin County divorce is filed, the district courts’ Standing Order on Children, Property, and Conduct of Parties limits what both spouses may do with property and records. Read it the day you file or are served, and before you sign anything outside the company’s normal routine: a new credit line, an equipment sale, an ownership change or an unusual bonus.
The court can also enter temporary orders. Under Tex. Fam. Code § 6.502, a judge can require sworn inventories and appraisements, order production of books and records, limit spending, give one spouse "exclusive control of a party’s usual business or occupation," and appoint a receiver to preserve property. Courts reach for receivers when property looks at risk, so make preservation uneventful: pay yourself the way you always have, keep company and personal money apart, pay vendors and taxes on schedule, and leave records intact.
Pull your company agreements early. Operating agreements, shareholder agreements and buy-sell provisions often restrict transfers to a spouse or former spouse, call for spousal consents or set a valuation formula, and loan covenants can treat an ownership change as a default. In an LLC, a spouse who receives a membership interest in the divorce becomes an assignee, not a member (Tex. Bus. Orgs. Code § 101.1115), which is one reason most settlements leave the company with the owner.
How the business usually gets divided
Splitting ownership of a working company is rarely practical. Common structures:
- You keep the company, and your spouse receives other community assets of comparable value, such as home equity, retirement or brokerage accounts.
- A buyout over time, through a secured promissory note with clear default terms.
- A sale, when neither spouse wants to run it.
- Continued co-ownership, which works only with firm governance and a cooperative relationship.
Settlement lets you set these terms instead of leaving them to a judge. Mediation and collaborative divorce also keep detailed financials out of a public courtroom. If you are still married and want to settle how the company will be treated, ask about a postnuptial agreement; if you are engaged, a prenuptial agreement does the same job before the wedding.
Before you act, and choosing a lawyer
The decisions owners regret most are made early: cutting pay, moving money, letting the company CPA act as the valuator. See the mistakes business owners make in a Texas divorce. If you are comparing lawyers, what to look for in a divorce lawyer for business owners in Collin County lists the questions to ask.
Scroggins Law Group and business-owner divorce
Mark L. Scroggins, our Managing Partner, is Board Certified in Family Law by the Texas Board of Legal Specialization, and his bio notes his background in family law and business litigation and his work with executives, business owners and entrepreneurs (Mark L. Scroggins). We meet owners from Plano, Frisco, McKinney, Allen and Dallas at our Plano office. Call 214-469-3100 or reach us through our contact page, and bring your company agreement and the last three years of business returns.
FAQ
Is my business separate property if I started it before we married?
It can be, but you must prove that by clear and convincing evidence, and the community estate may still have a reimbursement claim if marital effort increased the company’s value without adequate compensation (Tex. Fam. Code § 3.402).
Will my spouse get half of my company?
Not automatically. Texas divides community property in a "just and right" manner, and many owners keep the business while the other spouse receives other assets or a buyout.
Can my spouse take over the business during the divorce?
Control during the case depends on the company’s governing documents, the standing order and any temporary orders. A judge can give one spouse exclusive control of a party’s usual business or occupation under § 6.502.
Is goodwill part of the value?
Generally only enterprise goodwill, the part that would stay with the company without you. Goodwill that depends on your personal skill and reputation is not divided.
How long does a divorce involving a business take?
A Texas court generally cannot grant a divorce before the 60th day after filing, with exceptions for certain family-violence cases (Tex. Fam. Code § 6.702). Valuation, discovery and mediation usually make business cases take considerably longer.
This page is general information, not legal advice, and reading it does not create an attorney-client relationship.