Life is unpredictable. For small business owners, the stakes can be even higher. While we often focus on growing and running our businesses, it’s equally important to plan for life’s relationship highs and lows—like love, marriage, divorce, or even death. These events can have far-reaching business consequences, from legal battles to financial complications.
When Love Enters the Picture
First of all, it’s critical to understand that love can legally complicate a business, even if marriage doesn’t enter the picture. While business law isn’t our area, we want to touch on two Texas laws that can affect business assets when love sours:
In Texas, any serious, long-term relationship between two people who live together and who present themselves as being married essentially are married as Texas is a common law state.
Additionally, Texas is one of only nine states with community property laws. This means that most property acquired by a couple during their marriage is considered owned by both spouses.
When Love Exits
These Texas laws, combined with poor planning, mean a divorce or breakup can absolutely threaten the health of a business. A lack of foresight means the future of a business could be settled in family court. Obviously, this is not ideal.
When we covered this topic in 2022, we did so in the context of Brad Pitt and Angelina Jolie’s nasty divorce proceedings and how ownership in their wine estate in Provence was embroiled in the mess. Well, guess what? Their 8-year divorce is now settled, but the fate of Château Miraval remains in the courts.
Partnerships on Both Sides
Entering into a business partnership can further complicate matters. “Family changes for one partner affect the whole,” we wrote in our post, Partnerships are a Tricky Business. “For example, divorce and death can both lead to one partner’s stake suddenly being transferred to or shared with a spouse or former spouse outside the original ownership group.”
Imagine suddenly finding yourself owning a business 50/50 with your business partner’s spouse, who previously had no involvement in the business. It happens more often than you may think. It can be just as surprising, confusing, and frustrating to the surviving spouse who suddenly owns a business… with you.
Hope for the Best, Prepare for Surprises
Consult both a financial professional and an attorney about the best way to prepare a business for future relationships, marriages, divorces, or deaths. It’s important to structure a business and have the proper safeguards in place that protect it from personal legal and financial liabilities.
But also enter any business with a plan for exiting it, because you will, one way or another. That means preparing for asset protection and tax mitigation when it’s time to sell or pass down the business. If you’re in any sort of partnership or joint venture, be sure to have a buy-sell agreement, which can also be triggered when a business partner passes away.
Protect your hard work with the right strategies so your business remains resilient no matter what life throws your way. Feel free to contact us with questions.
