Back to Learning Center

Blog

Specialty tag(s): Complex Property, Business Valuation in Divorce, Divorce for Business Owners, Divorce

How to Navigate Business Ownership During a Texas Divorce 

Rob Frazer | September 23, 2025

Key Takeaways: 

• In Texas, businesses are often considered community property in divorce, and proving separate ownership requires strong evidence and detailed records. 
• A proper business valuation is essential, using income, market, and asset approaches to account for both tangible and intangible factors, including goodwill. 
• Division of business assets can be resolved through buyouts, offsets with other assets, or selling the business, with tax implications carefully considered.
• Skilled legal guidance helps entrepreneurs navigate these complexities, often through collaborative approaches that protect both the company and financial stability. 

For business owners and entrepreneurs, a divorce can feel like a threat to the foundation of your life. The question of what happens to a business in a divorce is often the most pressing concern, and rightfully so.  

Your company represents years of hard work and is central to your future. Navigating the unique legal landscape of divorce and business ownership requires a sophisticated approach that protects your interests while providing a path forward. 

A Legal Deep Dive Into Texas Community Property 

Texas operates under a community property system, which presumes that all assets acquired during the marriage belong to both spouses equally. This includes a business, even if only one spouse is listed on the ownership documents or actively involved in its operations. A business started before the marriage is considered separate property, but complications can arise quickly. 

For instance, any increase in the business’s value during the marriage, as well as the income it generates, is generally considered community property. Additionally, if community funds or the non-owning spouse’s time and effort were used to grow the business, a claim for reimbursement may exist.  

Proving a business is entirely separate property requires “clear and convincing evidence,” making meticulous record-keeping a lifeline for business owners. 

Why the Most Crucial Step Is Valuing the Business 

Before any division can occur, the business must be valued. This is far more complex than just a simple financial calculation. A business valuation for a divorce in Texas involves a comprehensive assessment that goes beyond tangible assets. It considers the company’s profitability, market position, and even the value of “goodwill.” 

Valuation experts typically use a combination of three recognized methods to determine a business’s worth: 

• The Income Approach: This method estimates the business’s value based on expected future earnings and cash flow. It is often used for profitable, stable businesses. 
• The Market Approach: This approach compares your business to similar companies that have recently been sold. It is particularly useful for businesses in competitive markets with available sales data. 
• The Asset Approach: This method calculates the value based on the company’s total assets (both tangible and intangible) minus its liabilities. It is often a “floor” value and less common for high-earning, service-based businesses. 

For entrepreneurs, this valuation is especially critical. A skilled legal team will work with forensic accountants and other financial experts to make sure the valuation correctly distinguishes between the company’s enterprise goodwill and your personal earning capacity.  

Enterprise goodwill is a transferable asset, such as a company’s reputation or customer base. Personal goodwill, however, is directly tied to the individual owner’s unique skills, reputation, and client relationships, and is generally not considered a marital asset subject to division. 

A precise valuation is the key to ensuring you are not financially penalized for your personal contributions and future earnings. 

Navigating the Division of Assets 

The goal of dividing a business in divorce is to find a solution that protects the company’s long-term viability while achieving a fair settlement for both parties. The process for how business assets are divided in divorce can be handled through negotiation, mediation, or litigation. 

• Buyout: The most common solution is for the business-owning spouse to buy out their co-parenting partner’s interest. This provides a clean financial separation and allows the business to continue operating without disruption. 
• Offset: The value of the non-owner spouse’s share may be offset by giving them a larger portion of other community assets, such as the marital home, retirement accounts, or investment portfolios. 
• Sale of the Business: If a buyout is not feasible and the parties cannot agree to an offset, the business may be sold and the proceeds divided. 

It’s also crucial to consider the tax implications of any agreement. While most transfers between spouses during divorce are tax-free, the person who receives an appreciated asset is also receiving its built-in tax liability. A thoughtful strategy can minimize future financial surprises. 

Finding a Path to Resolution 

The complexities of divorce and business ownership require a legal team that not only understands family law, but also the intricate financial details of your company. At Goranson Bain Ausley (GBA), we provide clear guidance on these and other strategies. 

Our attorneys are skilled at helping clients find creative solutions that protect both their business and their financial future. The process can be handled through a less adversarial approach like Collaborative Divorce, which allows for a more controlled and private negotiation focused on mutual interests. 

When you work with GBA, you gain the benefit of our experience in navigating these complex situations. We are here to offer the sophisticated, empathetic guidance you deserve. 

If you are an entrepreneur facing divorce, we invite you to speak with a GBA attorney to discuss your unique situation. We can help you understand the process and develop a strategy to protect what you’ve worked so hard to build.