Divorcing with a Business in Texas

Divorcing with a business in Texas can seem overwhelming, but with the help of a knowledgeable attorney and a team of experts assembled to assist you with all of the potential issues you may encounter, you can come out on the other side of the divorce having achieved the outcome you want.

What To Do If You Are a Business Owner Going Through a Divorce in Texas

If the business is community property, a court can do three things with the business if you go to trial: award the business to wife, award the business to husband or divide it in kind. The first two options are self-explanatory. The third, means that the business is divided by ownership interest and continues to operate with both spouses having an ownership interest in the business. As you can imagine, division in kind can be a bit of a train wreck. It is much more common that the business is awarded to one party or the other and the party maintaining the business “buys out” the other party’s interest in the business.

If you are a business owner going through a divorce the first three questions that arise are:

  1. What is the character of the business; is it community property, separate property or missed characterization;
  2. what is the value of the business; and
  3. Based upon the character and value of the business, what would you like to do with the business?

Is The Business Community or Separate Property?

It will be important to first determine if the business if community property or separate property. Some key information that is necessary to make this determination are the date of marriage, the date the business was created, what funds were used to start the business, and how each spouse contributed to the business during the marriage. Even if the business is determined to be separate property, all of the income generated by the business will be community property.

What is the value of the business?

A business valuation will most likely be necessary unless you and your soon to be ex-spouse are going to continue to co-own the business. The value of the business and how much each spouse owns will need to be determined. This is typically going to be done by a business valuation expert. The team at Scroggins Law Group will hire an expert business valuator on your behalf to determine the value of the business.

What do you want to do with the business?

At the beginning of the divorce, it will be important to decide what your ideal outcome is concerning the business. Based on your goal, you and your attorney will devise a strategy that has the best chance of achieving your goals concerning the disposition of the business and the conclusion of the divorce.

What Choices Do I Have as a Business Owner?

There are a wide variety of business disposition options, each of which comes with its own issues when disputed during a divorce. There are options available to you when it comes to deciding how to split your business during your divorce.

Buy Out Your Spouse

This may be the best option as long as there are sufficient assets to complete the buyout. This can be accomplished with cash or other property, equity in a home, or securities. It allows for a clean break and lets one spouse continue with the business while the other spouse can invest in a new business venture of their own or use the money for some other interest.

Sell the Entire Business and Split the Money

Selling the business and dividing the proceeds comes with pros and cons. It can be a very clean way to dispose of the business and cut ties with your soon to be ex-spouse. You will each receive proceeds that you can choose how to use. A downside of this option is that it can be difficult to find a buyer and take longer than you would like.

Keep Dual Ownership

This is one option available that is fraught with potential problems. To work, it is essential that you remain amicable with your soon to be former spouse. This requires a great deal of trust and the ability to work together after the emotional upheaval that comes from a divorce. This option is not ideal for most divorcing parties because it is not a clean break, but it may appeal to some.

If You are a Texas Business Owner that is Facing Divorce, Contact Scroggins Law Group Today:

The lawyers at Scroggins Law Group, PLLC, a boutique family law firm, consist of numerous board-certified family law specialists. If you are facing divorce and own a business in Texas, reach out to Scroggins Law Group, PLLC today to schedule an initial consultation with one of our professionals.