Divorce proceedings can quickly become complex when a family-owned business is involved. The Texas Family Code requires the court to devise a “just and right” way to divide marital property, which can be tricky when a business is one of the most significant assets.
Determining the business’s value, ownership structure, and the extent to which it qualifies as community or separate property are important and complex tasks. Additionally, there may be concerns about maintaining business operations during the divorce and ensuring its continued success.
At Barton & Associates Attorneys at Law, PLLC, we understand the sacrifices business owners are asked to make during divorce proceedings. Our role is to protect your financial interests while preserving the future of your business.
How is a Business Split Up During a Divorce?
Attempting to split up ownership of a business—particularly a small one—is often not possible. Texas is a community property state, which means that all property acquired during a marriage is presumed to be community property and is subject to division upon divorce. When determining how to split up a business there are several options on how to proceed, and our firm is here to help you determine the best approach for your business.
Buy Out Your Spouse
One straightforward way to deal with this issue is to buy out the other party. This generally means you would keep the business in exchange for some kind of payout to the other party. This does not have to involve a cash transaction. For example, you could keep the business in exchange for equity in the family home, a structured payment schedule, or ownership of a retirement account.
Sell The Company
In some situations, selling the business and splitting the proceeds might be the only feasible option. However, this approach has downsides, including the potential for a lengthy sale process, market uncertainty, and the emotional toll of parting with a business you worked hard to build.
Share The Business
Working with an ex-spouse is not a typical business relationship, but sometimes, it is the best approach in the immediate future. This is especially true in cases where both parties play unique and integral roles in how the company operates.
Understanding Goodwill in Business Valuation
A business is more than just its balance sheets or inventory. It also has the goodwill earned by years of serving the public in the community. While goodwill is subjective, it is something that must be taken into account when selling or transferring the business. It is important to work with experts who can help with the valuation process.
Receiverships in Texas Divorce
In Texas divorce cases involving business owners, a court can appoint a receiver to take control of the business under Texas Civil Practice and Remedies Code, Chapter 64, if there is a risk of mismanagement or asset hiding. The receiver’s role is to preserve business value, manage operations and ensure transparency during the divorce. Courts typically appoint receivers only when necessary, such as when a spouse is suspected of fraud or if the business is co-owned and there is a management deadlock.
The receivership lasts until the divorce is finalized or a business agreement is reached. Receivership can disrupt business operations and be costly for both parties. Working with a Texas divorce attorney can help avoid or mitigate the potential for receivership and protect your interest during the proceedings.
Talk to Barton & Associates Attorneys At Law, PLLC, About How a Divorce Can Impact Your Business
A divorce is the end of your marriage, but it does not have to be the end of your business as well. You may be able to keep your company or liquidate in a way that gets you the fair outcome you deserve. The attorneys of Barton & Associates Attorneys at Law, PLLC, are here to help you navigate this process. Contact us as soon as possible to discuss your situation.
