Who keeps the family business in a divorce?

Divorce can be a challenging time, especially when a family business is involved. Many business owners worry about what will happen to their business during the divorce process. Understanding how courts divide marital assets can help plan for the future of your business.

Marital vs. Separate property

The fate of your business in a divorce often depends on its classification as a marital or separate property. Marital property includes assets acquired during marriage. Separate property refers to assets owned before marriage or gifts and inheritances given to one spouse.

In Texas, state laws significantly influence the definition and division of property during a divorce. Texas follows community property rules, meaning courts divide marital property equally between spouses. Yet, how couples manage their property during the marriage can impact its classification as marital or separate property.

Is your business marital property?

If the business started after marriage, it is marital property. This means both spouses have a claim to it. If the other spouse contributes to its growth, they may consider a business started before marriage as marital property.

Professional practices like legal or medical businesses have unique rules. State laws vary, so consulting a family law attorney can clarify how these businesses are handled in divorce.

Valuing the business

Determining the business’s value is a key step in divorce proceedings. Courts use several methods to calculate this value, including:

• Market valuation: assesses the business’s worth if sold today.
• Income-based valuation estimates future net income and adjusts to present value.
• Asset-based valuation: totals assets and subtracts liabilities for book value.

Hiring a business appraiser can ensure accurate valuation. This value affects other divorce matters, such as child support and alimony.

Protecting your business

Prenuptial agreements are a useful tool to protect business interests. They define ownership before marriage, preventing the business from becoming marital property. Postnuptial agreements offer similar protections after marriage.

Shareholder agreements can restrict business transfers, safeguarding assets. Buy-sell agreements can define what happens to business shares in a divorce, especially with multiple owners.

Divorce and business ownership issues are complex. A Texas divorce attorney can provide guidance and help protect your business’s future. Seeking legal advice ensures you navigate this stressful period with clarity and confidence.