Legal Expert

Divorces Involving Businesses

Divorces are complicated enough, but business ownership makes them that much more so. If you own a business and are going through a divorce, you need the professional legal counsel of an experienced Austin divorce attorney on your side. At Philley Law, we have experience handling divorces for business owners and protecting their financial and professional futures, so please do not wait to contact our office for more information.

The Division of Community Property

In the State of Texas, the property that you and your spouse acquire throughout the years of your marriage is considered community property, which must be divided in a manner that is considered just and right upon divorce. “Just and right” in this context means to divide property fairly, given the situation at hand. Regardless of whether one or both spouses have ownership in a business, the business interests are very likely to complicate your divorce.

Complicating Factors

Business ownership can throw many complications into your divorce. Consider all of the following:

• If you and your spouse – or either one of you – started the business when you were married, it is likely community property. Dividing a business, however, can be exceptionally difficult. If one or both of you work at the business, there is the matter of your incomes, which one of you risks losing upon divorce. Selling a business outright is rarely the most financially sound decision, which means you’ll need to forge a path forward that manages to protect both of your rights and best interests while supporting the financial integrity of the business itself.
• If your spouse runs the business, but the business itself is community property, there is a very real risk that you won’t know the business’s actual worth. The fact is that if your spouse manages the business’s accounting, he or she likely has the ability to manipulate the numbers, which can leave you at a significant disadvantage.
• Even if the business is separate property, it is still unlikely to be a straightforward issue. If the business has increased in value over the course of your marriage, for instance, that increase almost certainly qualifies as community property. Further, if your family’s income is generated by the business, the matter of separate property becomes far more ambiguous.
• If one of you is going to buy the other out of the business as part of the divorce terms, it is imperative to arrive at a value that accurately reflects exactly how valuable the business is to your family. You and your spouse must agree to a method of valuation and a trusted appraiser, and you each might need to hire your own to compare results to ensure a fair result.