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What Steps Can I Take to Demonstrate That My Business Is Separate Property and Not Subject to Division in a Divorce?

Clayton Bryant | October 11, 2023

There are two different safeguards that business owners can employ to retain ownership of their business during a divorce. The first is to reach an agreement with your spouse as you enter into marriage with a prenuptial agreement or during the marriage through the use of a postnuptial agreement. The second safeguard is to take steps to demonstrate that your business is separate from the community property included in the marriage and not subject to division in a divorce.

Creating a Prenuptial or Postnuptial Agreement

A prenuptial or postnuptial agreement clearly outline who brought what property into the marriage and makes sure that, should marriage come to an end, that person retains ownership of their property. Agreements such as these can be invaluable tools for divorcing couples and can alleviate some of the stress and tension associated with property division.

Proving That Your Business Is Separate Property

Property that is acquired before the marriage is considered separate property. The same is true of property that you inherit. When managing Separate property, it is important to have clear evidence that supports property ownership. Without this support, the information is unclear, and you run the risk of the property being considered community property that would be subject to division. These are several ways that business owners can demonstrate their business as separate property. Minimize the stress and uncertainty surrounding the future of your business by following these simple tips to demonstrate that your business should be considered separate from the community property of the marriage.

1. Have Accurate and Organized Financial Records at the Ready

Having organized, accurate, and up-to-date records ready to hand over upon request shows that you, as the business owner, are prepared and confident in the finances of your business. Evidence supporting your claim to the business as separate property is contained within these records and can go a long way in clarifying a spouse’s role or investment in the company.

2. Do Not Comingle Business and Personal Property

If an item, especially a big-ticket item, such as a vehicle, is purchased for business use, it’s vital that the purchased item is used exclusively for its expressed purpose. Using business items for personal use weakens one’s argument that the property should be considered separate from the community property of the marriage.

3. Beware of Letting Your Spouse Contribute to the Business

In a healthy marriage and business partnership, it’s very common to want to help, to contribute, and while it’s easy to say ‘yes’ to a helpful, involved spouse, that might not be what is safest for your business. If your spouse contributed to the growth of the business during the marriage, that could make it much more difficult to keep the business separate, even if you started the business prior to the marriage. One of the best ways to protect your business in the event of a divorce is to draw clear boundaries and limit a spouse’s involvement in daily operations.

4. Pay Yourself a Fair Salary

Keep an eye on the average salary for a CEO in your area who runs a comparably sized business and pay yourself accordingly. If you reinvest most of your profits back into the business instead of using them to support yourself and your family, your spouse may be able to argue that they deserve a share of the value of your business.

Protect Your Business with an Experienced Divorce Lawyer

Working with a family law attorney who understands the intricacies of business ownership and complex property division, can help you understand how to best protect your business during the divorce process. Our knowledgeable divorce lawyers offer valuable support to business owners navigating the complexities and nuances of a divorce that includes substantial assets, minimizing the stress and allowing for the sustained focus on the business, knowing that experienced professionals at Goranson Bain Ausley are on your side and protecting your future. Contact us today for a consultation to get started.

Learn More

With over 15 years of experience, Clayton Bryant manages the full range of family law cases, including property division, child custody, and trusts and estates. A seasoned litigator, Clayton is experienced with jury trials and is a certified mediator. His clients include professionals and their spouses, parents who want to put the interests of their children first, and mid-life clients looking for the best path forward as they begin new chapters in life. 

For more information about high-net worth divorce, contact Clayton Bryant at our Granbury office at 877-737-4830.

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