How Can Divorce Affect Your Business?

If you own a Texas business and your marriage ends, you need to take steps to protect your enterprise. Because Texas is an equitable division state, assets and debts acquired by either spouse during the marriage constitute community property that you must divide fairly.

Review these considerations for business owners facing divorce.

Explore your options

You have a few possible paths for negotiation when you want to protect your business in a divorce. Some potential outcomes include:

  • Owning the business together with your former spouse
  • Buying him or her out based on contributions to the company and the fair market value of your business
  • Selling the company and dividing the proceeds

Every business owner will have a unique situation that requires a unique solution.

Refer to business documents

If you own your business with others, your operating agreement should address the fate of the company if any of the partners divorces. You can document the ownership interests each person’s spouse would receive in a divorce. For example, you can indicate that each spouse would receive a flat 40 percent of the value of the business in a divorce and note the method of valuation to use.

Prepare to compromise

If your business is your biggest priority in the divorce, think about your spouse’s largest priority and whether that trade-off makes sense for you. For example, will your spouse agree to forgo a stake in the business if you forgo a stake in the marital home?

Carefully consider both the operational and financial impact of a divorce on your business when negotiating a fair property settlement with your spouse.

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