Sugarland Texas Small Business Owner Divorce AttorneySugar Land Small Business Divorce Lawyers

Are you planning to get a divorce? If you live in Sugar Land, you’re like many other people—more than 8 percent of the population is divorced or separated.

If you own a small business in Sugar Land, however, you will have special needs during your divorce. Here are some things you should know.

Is My Business Community Property?

Texas is a community property state. What this means is that most property and assets that are acquired during the marriage are considered owned by both spouses and subject to a division that is considered “just and right.” It is likely that at least a portion of the value of your business is considered a marital asset and, in turn, community property. How much of your business is community property depends on whether you created and developed your business during the course of your marriage or before.

According to Texas law, if your business was founded before your marriage, or it was founded using “separate funds”—that is, funds that predated the marriage and that one spouse acquired through inheritance or a gift—then the business, itself, it considered separately owned. However, this does not mean that there isn’t a community property aspect to the business that must be dealt with during the divorce. Here are some examples of business-related issues that fall under the umbrella of community property, even when the business is separately owned:

  • The value of the business now is more than it was before the marriage, and that increase in value occurred due to the financial and labor contributions of both spouses.
  • Joint finances were used to expand the business.
  • The spouse played a role in the operations of the business during the time of the marriage.

As a business owner, one of the first things to do when determining the divisibility of the business is to speak to a business appraiser. A business appraiser will take a comprehensive look at the business, including financial statements and tax returns. In addition, the appraiser will consider intangible assets, such as the “goodwill value” of the company. There are two types of goodwill, in terms of business valuation: professional goodwill, which is how much the reputation of the business owner contributes to the success of the company and is considered separate; and the enterprise goodwill, which is the reputation of the business itself, and is considered divisible as community property. The appraiser will also consider the assets and liabilities of the business, the profits, and what similar businesses in the region have sold for when determining the business’ value.

Once a value is determined, an experienced divorce lawyer can help you to consider how much of that value is community property and, when considered along with other assets that must be divided in the divorce, what a right and just division might be.

Does Getting a Divorce Mean I Have to Sell the Business?

Not necessarily. Texas does not require spliting marital property right down the middle, but rather to split it in a way that is “just and right” for both parties. There are a number of options for dividing marital property in a way that is equitable and yet still allows the business to be retained and continue operating. As with all assets to be divided in the divorce, the court will consider a number of factors, including:

  • The grounds for the divorce and who, if anyone, was “at fault”
  • The earning power and future employability of both spouses
  • Who has custody of the children
  • How the other assets are divided—for example, one spouse will own the family home and other assets, while the other continues to keep and own the business

What Are the Options for Dividing the Business in a Divorce?

There are three common ways that the value of a business can be divided in divorce:

  • Selling the business and splitting the proceeds. This is sometimes the best way to ensure that each spouse gets an equitable share of the value of the business. However, there are some problems with this method, including if the business takes a long time to sell, market fluctuations that may impact the value of the business, or if the spouses disagree on the value. Additionally, the business represents income for one or both spouses and may contribute to the ability to pay child support or maintenance, as well, creating new issues to iron out during the divorce process.
  • Buy out. This option provides for one spouse to “buy out” the other spouse’s ownership in the business. This involves either a lump sum being transferred from one spouse to the other, or an agreement between the two whereby the buyer pays back the seller over time. Sometimes, spouses are able to barter other assets if the buyer does not have enough cash on hand to pay for his or her spouse’s portion of the business outright.
  • Co-ownership. While the idea of divorcing spouses continuing to own and operate a business together seems implausible, people have done it and have made it work. Just because a couple doesn’t want to continue living together and being married, some remain amicable enough to keep the business intact as it is. Another way that spouses can keep the business intact through the co-ownership option is if one continues operating the business and the other agrees to accept a portion of the future profits of the business. However, problems can arise if the business stops making a profit.

Let Our Sugar Land Divorce Lawyer Help You

Determining how your divorce impacts your business and how to separate it in a fair and equitable way calls for an open mind, legal expertise, and some creativity. An attorney from The Vendt Law Firm, P.L.L.C., can help you explore all of the options that are available to you and provide the guidance you need to protect your property rights, ensure that you receive your fair share, and also make sure that there are no legal loose ends that can cause problems in the future. To schedule a consultation with our Sugar Land divorce lawyer, call us at (832) 276-9474 or contact The Vendt Law Firm online.

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I cannot recommend Mr. Vendt and his associates more! Frank guided me through a very challenging divorce and I couldn’t be more pleased.
Divorce Law Firm
Date published: 09/07/2018
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