What Happens to Your Business When You Get Divorced?

Divorcing the businessBeing successful in business means taking calculated risks, working hard and filling a need in the marketplace. Unfortunately, business success doesn’t always go hand in hand with marriage success. In fact, it is not unusual for clients to tell us that one or both spouses working too much contributed to the breakdown of their marriages.

When a marriage is too far gone to be saved, a couple who owns their own business want to know what will happen to their business. Will they sell it altogether and split the profit 50/50? Will one spouse have the option to buy out the other spouse? Will they both refuse to sell, perpetuating the conflict as they argue over business management decisions?

Is the business community property?

The first question to ask is whether the business is community property. Under Texas community properly law, all property acquired during the marriage is considered jointly and equally owned by both spouses, with few exceptions.

If the business was started during the marriage with money from wages, savings or other community property (or with loans secured by community property), the business itself will most likely be considered community property.

Even if the business was started prior to the marriage, the difference in value between then and now will most likely be considered community property. A qualified business valuation expert can determine current value and estimate the business’s earlier value.

How will the value of the business be divided?

Community property is subject to equal division during a divorce, but that doesn’t necessary mean the business assets will be split down the middle. The business may need to be liquidated in whole or in part to reduce business debt.

If the business is viable as an ongoing concern, one spouse might be awarded the business in total, while the other spouse receives a pool of property with a similar value. Or the court may direct that both spouses retain ownership interests while one spouse continues managing the company.

Can we come up with our own agreement?

If you and your spouse have a tentative agreement as to how you would prefer to divide the business or its value, make it known to your attorneys and discuss your options. It is undoubtedly better to craft your own agreement, with knowledge of your individual circumstances and the benefit of experienced legal advice, than to leave the fate of your business in the hands of a third-party decision maker.

The experienced family law attorneys at Peterson Law Group review your circumstances, including your ownership interests in a business, and explain your options in a family law context. Peterson Law Group has significant experience in family law, estate planning, and business law cases. To set up a consultation, call us today at 979-703-7014 or visit us online to learn more about us.

About Chris Peterson

Chris Peterson is an attorney and the owner and founder of Peterson Law Group, a Texas law firm with offices in Bryan/College Station and Kingwood. He mainly practices in the areas of Estate Planning and Business Planning. Chris is also a Certified Estate Planner. Besides his law practice, Chris is a serial entrepreneur and community volunteer. He is known for his cutting edge law practice that utilizes technology to deliver efficient, excellent work.