Texas Divorce and Business Ownership Attorneys
Protecting a Lifetime of Investment and Achievement
When business owners face divorce, their biggest question is: What will happen to my business? Many fear that divorce may jeopardize the growth of the business or that their spouse will take it from them. To best answer your questions, your attorney will need to know when your business was founded in relation to your marriage and if you have put in place any legal provisions to protect your business.
Common Ways to Divide a Business in a Divorce
When dividing a business in a Texas divorce, there are three main options. You and your former spouse can remain co-owners, you can buy out your spouse’s interest, or you can sell the business and divide the profit. There are a variety of factors that can influence what road you decide to take, which include:
- If your business is considered community or separate property;
- The valuation of your business;
- You and your spouse’s objectives for the business.
You may have a preconceived idea of how you would like to maintain ownership of the business. However, it is important to consult an attorney experienced in dividing businesses in divorce to know your options and the implications of each choice. You want to be confident you are making the right financial decisions.
Is My Business Community or Separate Property?
Determining the status of your business begins with understanding the concept of community property. At the time of divorce, all property is presumed to be community, but that presumption can be defeated by “clear and convincing” evidence (a higher evidentiary standard used to determine whether an asset is separate property). Deciding whether property is separate property involves establishing when and how the property—the business, in this case—was acquired.
The way a business is operated can affect its characterization. Strictly observing business formalities by avoiding commingling business and personal funds is critical. Likewise, is paying yourself a fair salary. The community estate can make a claim for your time, toil, and effort used in building up the value of your separate property business if you fail to adequately compensate yourself.
How is a Business Valued During Divorce in Texas?
In a divorce, the fair market value of the business must be determined. It is the price that a hypothetical willing and able buyer would pay to a hypothetical willing and able seller—when neither is under compulsion to sell or buy.
For the purposes of the divorce process, there are several ways to determine the business’s fair market value. They are:
- Spouses can agree on a value, which is then listed on the community property spreadsheet.
- Spouses can search databases specific to that business’s industry to discover the selling price of similarly situated businesses in the recent past.
- Parties can follow a more formal process of hiring a qualified business appraiser to value the business.
Learn more on our Business Valuation page.
Protect Your Business in Divorce
Your business is not just your livelihood, it is the result of hard work and determination over the years. Whether you’re facing divorce, or are married and want to consider your options, consider these strategies to protect your business:
Protect your business before divorce is on the table with a prenuptial or post-marital agreement. These agreements benefit both you and your spouse as they help manage expectations and outline the roles each spouse plays in the business prior to contentions that may arise. By writing a prenuptial or post-marital agreement, you can save time, money, and emotion in the long run.
Know How Your Business is Valued
One of the most important factors to establish in divorce is if your business will be considered separate or community property and what to expect during the divorce process by way of property division. If you start to feel overwhelmed by the complexity, rely on the counsel of a Goranson Bain Ausley attorney to help manage these issues.
Hire the Right Attorney
One of the best ways to protect your business is to hire an attorney who has experience representing business owners. Such attorneys have a unique skill set that sets them apart from other attorneys as they understand just how much is at stake. You put your heart into your company as an owner; make sure you have qualified counsel by your side to help protect it.
Work with Our Experienced Texas Divorce Attorneys
Our Austin, Dallas and Plano based attorneys offer the specialized expertise that business owners require in divorce. Not only do our attorneys have deep knowledge of business matters, but many also have firsthand experience as business owners themselves. They understand just how much you have invested in your business and appreciate that it represents a lifetime of achievement. Helping clients preserve maximum value of their businesses at the time of divorce is a priority. When business owners divorce, they can rely on the attorneys of Goranson Bain Ausley to guide them on how to protect their assets.