Within the property division process, the Texas family law distinguishes community property from separate property. The analysis is necessary for the purpose of allocating property to parties pursuant to a divorce. This is because community property is treated different from separate property. Assuming there is not a

property division agreement

, under Texas law, all jointly held community property is divided by the family law court and distributed to divorcing spouses. However, some property can be variable and difficult to characterize. This is often the case when one spouse to an ending marriage holds ownership in a business.

Whether one is a company owner or spouse of the business owner, he or she should integrate corporate law principles into the assessment of the property division process. One could be entitled to a fair share of business-related community property; however, this could be overlooked if the assets are disguised in what appears to be a separate business. If this is the case, one spouse could walk away with the businesses’ assets, which were supposed to be divided equitably in the divorce within the community estate.

Property division of business assets

A corporation is generally considered its own entity, meaning it is characterized as separate property. In most divorce cases, a spouse’s interest in a corporation is subject to division by a family law court; the remainder of the corporate property is off limits and not pushed into the community property portion. However, there is an exception to this rule when an “alter ego” exists.

The “alter ego”

If a business is an “alter ego” of a divorcing spouse, courts may transfer assets out of the separate company and divide them among litigants in the property division process. A business is an alter ego of spouse if the corporate veil of the business is “pierced,” changing the disposition of company property. The corporate veil will be “pierced” if a family law court finds that there is essentially no distinction between the business and a divorcing spouse (as if the business no longer exists and the two are one in the same). Furthermore, the divorcing spouse will be considered the alter ego of the company if a spouse’s use of the business damaged the community estate (the couple’s marital assets) beyond repair to the point where it would be fraudulent or unfair to separate the spouse from the entity. This might happen, for example, when a personal business completely funds a family’s income.

When the property division process begins, courts will look at all jointly held property. It is important to ensure that all assets subject to property division are included in the community property estate. Likewise, it is just as important to protect separate business assets, if necessary. To make sure that your property division resolution is equitable, retain the assistance of a qualified family law attorney in your area. A lawyer can explain business principles and how they apply to your particular situation.

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Photo of Michelle O'Neil Michelle O'Neil

Michelle May O’Neil has 27 years’ experience representing small business owners, professionals, and individuals in litigation related to family law matters such as divorce, child custody, and complex property division. Described by one lawyer as “a lethal combination of sweet-and-salty”, Ms. O’Neil exudes…

Michelle May O’Neil has 27 years’ experience representing small business owners, professionals, and individuals in litigation related to family law matters such as divorce, child custody, and complex property division. Described by one lawyer as “a lethal combination of sweet-and-salty”, Ms. O’Neil exudes genuine compassion for her client’s difficulties, yet she can be relentless when in pursuit of a client’s goals. One judge said of Ms. O’Neil, “She cannot be out-gunned, out-briefed, or out-lawyered!”

Family Law Specialist

Ms. O’Neil became a board-certified family law specialist by the Texas Board of Legal Specialization in 1997 and has maintained her certification since that time. While representing clients in litigation before the trial court is an important part of her practice, Ms. O’Neil also handles appellate matters in the trial court, courts of appeals and Texas Supreme Court. Lawyers frequently consult with Ms. O’Neil on their litigation cases about specialized legal issues requiring particularized attention both at the trial court and appellate levels. This gives her a unique perspective and depth of perception that benefits both her litigation and appellate clients.

Top Lawyers in Texas and America

Ms. O’Neil has been named to the list of Texas SuperLawyers for many years, 2011-2018, a peer-voted honor given to only about 5% of the lawyers in the state of Texas. In 2014-2018, Ms. O’Neil received the special honor of being named by Texas SuperLawyers as one of the Top 50 Women Lawyers in Texas, Top 100 Lawyers in Texas, and Top 100 Lawyers in DFW. She was named one of the Best Lawyers in America for 2016 and received an “A-V” peer review rating by Martindale-Hubbell Legal Directories for the highest quality legal ability and ethical standards.

Author and Speaker

A noted author, Ms. O’Neil released her second book Basics of Texas Divorce Law in November 2010, with a second edition released in 2013, and a third edition expected in 2015.  Her first book, All About Texas Law and Kids, was published in September 2009 by Texas Lawyer Press. In 2012, Ms. O’Neil co-authored the booklets What You Need To Know About Common Law Marriage In Texas and Social Study Evaluations.  The State Bar of Texas and other providers of continuing education for attorneys frequently enlist Ms. O’Neil to provide instruction to attorneys on topics of her expertise in the family law arena.