Because Texas has become a haven for businesses large and small, it’s not unusual for individuals to start a small business here.
For a business owner facing a divorce, ownership and the profits from that business could be part of the business marital property estate to be divided and awarded to the other spouse. Much depends on when the business began, and how profits were used.
Further complicating matters if both parties are business owners partners.
Timing
When the business began is as much a factor as its net worth.
• If one party started the business prior to the marriage, the business is considered separate property
• If one or both parties started the business after the date of the marriage, it becomes marital property and is treated according to Texas community property laws
The business can remain separate property after the divorce. Income during the marriage may be considered community property and subject to division. A prenuptial agreement helps keep the business separate.
Business Valuation
If a couple starts a business during the marriage, it will be part of the marital estate. If the business is separate property by one party, the increased valuation of the business may be considered community property.
Business valuation reviews:
• Timing of the start of the business
• Time and effort each spouse played in running and growing the business and its value
• Financial equity each spouse invested in the business
• Liabilities of the business
• How much of the business’s revenue was marital income for one or both parties
Tangible assets, such as equipment, are part of the analysis, as well as future earnings. Valuation will also examine intangible assets of the business, such as branding, reputation, and goodwill.
What Options Do Business Owners Have In A Divorce?
The business may be included in the property division, with multiple options:
• If both parties operated the business during the marriage, they can continue, if it was an amicable split. They should have an operating agreement to define both party’s jobs after the divorce.
• One spouse can buy out the other spouse’s ownership of the business, retaining sole ownership
• One spouse can offer the other the equivalent amount in community property to keep ownership, similar to a buyout
• The business can be split into two entities
• The parties can sell the business
A divorce attorney who understands business divorce can help you decide which is right for your individual situation.
Business Divorce In Fort Worth
Wendy L. Hart has been helping people in the Fort Worth area with all their family law issues since 2001. She represents both men and women in all aspects of divorce, including spousal and child support matters.
Visit our Mansfield office at 2363 Highway 287 N, Suite 108, use our online contact form, or call us at (817) 842-2336. Don’t try to handle a divorce, spousal maintenance, or other family law matters by yourself. Contact The Law Office of Wendy L. Hart and get the help you need.
