When Divorcing Spouses are Also Business Partners


Divorce is hard enough  and the financial aspects can feel overwhelming, especially if one spouse will have to find a different source of income.  Some businesses can become “like families” and the divorcing couple may bear the additional worry of how their split will affect the employees and customers.

It can be difficult to decide how to divide a business in such a way that meets the needs of the divorcing partners (and their children, if any) and also allows the business to continue to operate profitably.
Some things to consider when deciding how to divide the business (in a community property state, such as Texas) are as follows: 
  1. Is the business separate property or does it include any separate property?   Did one spouse own the business prior to marriage?  If so, for how long?  How did the value of the business change during the marriage?
  2. Is one spouse more qualified to run the business than the other? (Some businesses may require certain licensing or certifications that only one spouse possesses, or may be dependent on one person’s image, reputation or personality.)
  3. What is the true valuation of the business?  What is it really worth?  How does this fit into the “big picture” of what the marital estate is worth overall?
  4. Are there issues regarding the structure of this business that need to be updated? (There may be formal changes that need to be made in the corporate or partnership structure and paperwork that will be required to be filed at the state level).
  5. What are the tax ramifications?
  6. Is collaborative law a better way to divorce in this situation? 
A divorce that divides a family and a business does have an additional level of complexity.  It is important understand your rights and responsibilities and to find a competent family and business law attorney who has the experience, knowledge and skill to make the process as understandable and efficient as possible.

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