Say you're an entrepreneur that has been running a successful small business for a few years before you meet that person of your dreams. Since the business is still new, you are still the sole owner of the business. Now that you want to get married, does your business become marital property?
Tiffany and Leon Chen are a married couple that started out as business partners in Tiffany's Treats, a company that delivers hot cookies. The two have been working together since they were in college, according to KHOU-TV.
So how does their marriage change the ownership of their business, if at all?
Texas, as we know, is a community property state. This means that all money earned and all debts incurred (with a few exceptions) are owned by the "community" and would be split 50/50 upon divorce.
Anything that is not community property is separate property, which is anything owned by only one of the spouses. It is generally things like inheritances, anything owned before marriage, and to some extent a business owned before marriage.
With a business, while it may start out in the marriage as separate property, it's status can change if it gains value throughout the marriage. For example, if a spouse works in the business, he or she may get more than just a salary. If this is the case and a couple divorces, the court would then value the benefits given by the non-owner spouse.
Here, it seems like the Chens have been joint owners of Tiffany's Treats from its start 13 years ago. If that is the case, it is likely that the business would continue to be jointly held and most likely be determined to be marital property.
There might be a different conclusion if there were a more formal business arrangement between the two spouses. If they both owned separate shares of the company before they were married, it could be looked at as a separate property situation.
All in all, business owners should be sure to look at their finances and perhaps think about a prenuptial agreement to make any sort of separation easy. Otherwise, if you have a good partnership in a joint venture small business like Tiffany and Leon Chen, your small business becoming marital property will probably not seem like anything more than a treat.
Related Resources:
- Need a Houston Family Law Lawyer? (FindLaw)
- Checklist: Dividing Marital Property (FindLaw)
- Money is Forever: How to Protect a Small Business During Divorce (FindLaw's Houston Family Law Blog)
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