Salvaging a Small Business During Divorce

The livelihood of a Texas small business owner can be at stake during a divorce. A business is not like a car or a home, non-income producing marital assets which can often be sold readily or transferred to satisfy court-ordered property division.

Private businesses frequently represent a spouse’s income lifeblood. The loss or depletion of a small business during divorce litigation can wipe out a lifetime of effort. That’s why legal and financial experts recommend shoring up the asset before it becomes part of a divorce dispute.

Prenuptial agreements serve to protect individual financial interests in the event of divorce. When couples agree before marriage to define the ownership and distribution of separate and marital assets, both parties are prepared for the worst, even if it never occurs.

Detailed contracts can also be designed for business partnerships and with shareholders to lessen any impact an owner’s divorce would have on a company.

Business owners who fail to take advance strategies to shield a company from property division fallout still have options to protect their investments.

Courts cannot make a determination about asset division without knowing how much a business is worth. The costs of having a business valued can be high. Often each spouse hires a separate expert to conduct the business valuation.

It can be much cheaper to agree on one third-party expert to dive into the company’s books, if an ex-spouse and the court are agreeable. Efficient record keeping can trim costs by making business data easily accessible for a valuation expert.

Legal advisors recommend attaching a confidentiality agreement to the valuation to protect vulnerable business information.

Divorce settlements are often reached without the need for a business to be sold. A spouse who is a non-owner may accept a payoff, preferably over time. An installment arrangement could be a significant, long-term expense but it might also prevent a business from being dismantled by divorce.

Source:, “How to Minimize the Impact of Divorce on Your Small Business,” Jennifer A. Brandt, Aug. 2, 2012

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