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Specialty tag(s): Divorce for Business Owners

Can My Spouse Take Half My Business in a Texas Divorce?

Rob Frazer | March 10, 2022

How will my business be divided in divorce?

Many business owners going through the divorce process want to know whether their spouse can take a business that was created, either before or during the marriage.

For the most part, the answer to this question is, it depends. However, for most of the business owners that I represent during the divorce process, the outcome is the business owner does retain ownership of the business.

Is my business considered an asset in divorce?

I often get the question of whether the business is an asset to be addressed during the divorce process. And the answer is yes. One of the objectives of the divorce process is to identify all the assets, including businesses that have been acquired during the marriage and then determine how to divide those assets. As an asset, the business needs to be identified, valued, and then allocated. Part of that process is to determine what spouse is going to retain the business.

Do you have an example of how a business is divided in divorce?

An example is if the wife owns a small business, and her goal is to retain that business through the divorce process. Step one would be identifying the business as an asset, step two is determining what value the business has, and step three would be allocating that asset to the wife. Along with the entire community property distribution through the divorce process, the value of a business is determined in the divorce process.

How is a business valued in divorce?

Typically, through the sharing of information. The Texas pattern jury charges, which we use as guidance in our valuation and distribution of the community estate process, determine that a business’s value is determined by what a third party would pay for that business, absent the goodwill that the owner of the business owns. So effectively saying most businesses, if they’re smaller in nature, rely almost entirely on the goodwill of that business owner. By that, I mean if that owner was to sell their business to a third party, without the owner retaining influence on the business, the business would be typically worth nothing. So, we take that into consideration as to what the value of the business is.

However, larger businesses that own vehicles or equipment can be valued as to their value if sold to a third party. A business owner can protect their ownership interests in the divorce process by working with their attorney at the outset of the legal proceeding to identify the ownership interest in that business. By that, I mean some businesses were formed prior to the marriage, which means their characterization through the divorce process will be that of separate property. However, businesses formed during the marriage will likely be identified as community property to protect their interest.

Why is it important to work with an experienced family law attorney when valuing a business in divorce?

The best approach is to work with your attorney to get a proper valuation of your business and ensure that your goals are met through the process, including walking away from the divorce with your ownership interest intact.

What is your top advice for business owners going through a divorce?

My top advice for a business owner going through the divorce process is to remain calm. There is structure and consistency to the divorce process. Maintain your business, run your business, keep detailed records that you share with your attorney and know that there’s light at the end of the tunnel for your business.

One of the goals I have with working with business owners through the divorce process is to make sure that I am working with you step by step to ensure that the entity you have created and poured your heart, soul, and time into is protected through the divorce process. So, at the end of this process, your ownership is intact, and you can successfully move on from the divorce.

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An experienced family lawyer and partner, Rob Frazer is board-certified in family law by the Texas Board of Legal Specialization and is a Director of the Austin Bar Association. Named in The Best Lawyers in America© in the field of Family Law, 2019 – 2021, Rob has an extensive litigation history and seasoned track record. A tireless advocate for his clients, Rob excels the complexities of high asset property division.

For more information on how to protect your business in a divorce, please contact Rob Frazer at 512-454-8791.