Learn more about the top 10 things business owners should consider before getting married in Texas.
10 Things Business Owners Should Consider
Before Getting Married in Texas
First, the 3 basic definitions of community and separate property are necessary to understand the need to make any decisions prior to marriage:
Separate property is anything you acquired prior to marriage or that you received during marriage and which was a gift or inheritance;
Community property is anything you acquired during marriage which is not separate property; and
Income from separate property is community property.
Second, those 3 definitions apply no matter how long the marriage. This is true unless you have a written pre- or post-marital agreement saying otherwise or you mix together your separate and community assets so much that they cannot be separated.
Third, as long as separate property can be traced, often with the help of a forensic CPA familiar with Texas community and separate property laws, there is not comingling.
If it is your desire to preserve your separate property ownership of a business you owned prior to marriage, then you need to give consideration to the following: Is your business entity a sole proprietorship or have you formalized the business into a limited liability company (LLC), C Corporation, S Corporation, Partnership or Limited Liability Partnership (LLP)? It is easier to keep track of a separate property formal entity. Consult with your corporate attorney and tax advisor to determine which business form would serve both your tax, liability, and separate property preservation best.
Once your business entity is formed, keep all records establishing your separate ownership interest. Also, establish the methods you are going to use during marriage to maintain record keeping evidence of your separate property ownership interest. You may want to consult a family lawyer or a forensic CPA who routinely does separate property tracing work.
Do not refinance, re-invest in your business or buy a greater share in a business in which you do not own 100% without consulting your family law attorney, corporate attorney, and/or forensic CPA so that the refinance or re-investment is documented in a manner that best preserves your original separate property, even if there becomes a fractional community property ownership interest.
If your business has owners other than yourself you may want to have a buy-sell agreement among the co-owners and their spouses to protect the business in the event any co-owner dies, is incapacitated or divorces. Ideally, all spouses of co-owners need to review the document with their own independent attorney. Ideally, the agreement provides a process for fair valuation of the company when one of the trigger events occurs. Keep in mind that the Texas Supreme Court holds that spouses have a fiduciary duty to one another during marriage. Building anything other than a fair agreement gives grounds for a spouse to challenge the buy sell agreement.
5. Consider whether you want a pre-marital agreement as an additional means of preserving your separate property ownership interest or whether you want to rely solely on the methods described above.If you have a pre-marital agreement, consider what you want the document to accomplish:
a. Do you want to preserve your separate property ownership only.
b. Do you want to make your income from separate property ownership yours only no matter what type of income including dividends, wages and paycheck income;
c. Do you want to make your wages and paycheck income from your separate property ownership yours alone or community property.
6. Are you and your fiancé marrying later in life and want to preserve the property accumulated by each of you to pass to your respective adult children?If yes, an additional consultation you should have is with your estate planning attorney to be sure that your estate planning matches your intent.
7. Finally, stand back and look at the entire situation and picture the kind of marriage you want, hopefully for the rest of your life.Beyond preserving separate property, do your plans foster the kind of marriage you want.
If you would like to discuss how marriage may effect your business or any other family law issues you may have, please contact our office, at 214-303-0142 or our temporary number 972-452-3968, e-mail firstname.lastname@example.org or visit our website www.cawilsonlaw.com to schedule an appointment.
Attorney Carol Wilson has skillfully litigated and tried complex divorce, property division, and child custody cases for more than 30 years. Carol provides expertise, focus and compassion in times of family turmoil. Carol is a graduate of SMU, JD. 1985, became Board Certified in Family Law by the Texas Board of Legal Specialization, 1992, and established her firm in the Turtle Creek area in 1995. Law Office of Carol A. Wilson, PLLC, principal office in Dallas, Texas.