If you own a business, your most valuable assets may not be your home or retirement account. They may be your software, patent, trademark or ownership interest in a company.
A divorce can raise questions about assets that do not fit neatly into traditional property categories. You may have concerns about whether your spouse has a claim to part of the business, how a court may determine the value of assets that have not yet produced income or what business information could become relevant during the case.
Why entrepreneurs face unique divorce challenges
Business owners and founders may hold assets that differ from traditional forms of property. Assets that can create unique issues in divorce include:
- Owning an interest in a closely held business
- Developing patents, trademarks or copyrights
- Creating software or proprietary technology
- Receiving startup equity that has not produced income
- Holding licensing agreements or royalty rights
These assets may derive much of their value from future growth, licensing opportunities or the continued success of the business. They also can be difficult to value because they may not have an established market price or a history of generating income.
Can IP become part of property division?
Texas follows community property rules. In general, property acquired during the marriage may become part of the marital estate, while separate property may remain with the original owner.
Several facts that may affect how a court classifies intellectual property (IP) and business interests include:
- Creating the intellectual property before the marriage
- Using marital funds to develop the asset
- Increasing the business’s value during the marriage
- Generating income from the asset during the marriage
The fact that an asset becomes part of the marital estate does not necessarily mean your spouse will receive ownership of the business or IP itself. A court may instead determine the asset’s value and consider that value when dividing marital property.
Why valuation can become a major issue
IP and business interests can be difficult to appraise. A patent may have future earning potential but little current income. A software platform may still be under development. A startup may not yet have an established market value.
These circumstances can lead to disagreements about what an asset is worth. In many divorces involving a business, valuation becomes one of the most disputed issues because intangible assets rarely have a clear dollar value.
When divorce involves more than traditional assets
Property division may involve financial records, business documents and information about company operations. For some business owners, those materials may include trade secrets, proprietary technology or other sensitive information.
When a business or IP becomes part of a divorce, questions may arise about more than ownership. The case may also involve the value of intangible assets and the information needed to evaluate them. For entrepreneurs and founders, a divorce may involve assets that derive much of their value from future growth.