What to Do With a Business During Divorce

by | May 21, 2019 | Business, Family | 0 comments

Owning your own business is part of the American Dream for so many people. It carries a certain prestige, the freedom of being your own boss, and speaks well of your work ethic and entrepreneurial spirit. But if you built your business while you were married, and you are now going through a divorce, what will happen to your business? Will you walk away with all of it? Half? None?

Texas Divorce and Businesses

Davis, Ermis & Roberts, P.C. has represented business owners who were facing divorce, and now we want to share some tips with our readers who might be in the same situation.

A client’s first concern is usually whether or not their spouse will be entitled to half of the business after the divorce. It’s common knowledge that Texas is a community property state, which means that your spouse has a claim to half of what you own once your marriage ends. 

In truth, it all depends on when your business was formed. If you started your business before you were married, it can be considered a separate property – yours and yours alone. Sometimes some parts of the business are determined to be separate property, while others are shared between spouses. These communal parts of the business are called quasi-community property.

 

Community Property Businesses

If you formed your business after your marriage date, you will almost certainly be required to split it with your spouse. There are a few ways to go about this.

 

  1. You cash your spouse out. This approach requires you to have an accurate valuation of your company’s worth. Then you must determine how much of the business your spouse is entitled to. Once this is settled, you effectively buy out your spouse’s share of the business and go your separate ways.
  2. You sell the business. If you no longer wish to run the business, it might be easier to sell it and split the proceeds with your ex. Again, this requires a true valuation, and your spouse must agree to these terms.
  3. You run the business together. While not a very desirable outcome for most parties, if you cannot come to terms with your spouse, you might end up as business partners. This arrangement would continue until you sell your part of the business to your spouse, or until you both agree to sell to a third party.

Mitigating Circumstances

A judge might decide to split the business in your favor if it is a family business that was passed down to you, or if you have been the one who works in the business and derives their income from it. Be prepared to show all the necessary paperwork to support your claim in court.

We Advocate for You

Davis, Ermis & Roberts, P.C. has experience with businesses and Texas divorce law. We know that divorce proceedings involve a lot of paperwork and negotiation, all during one of the most stressful times in your life. Don’t get lost in the details. Call us today, and let us advise you and represent you during this troubled time.