Divorce and the Family Owned Business

 Posted on July 16, 2017 in Uncategorized

When a business is an asset in question during a divorce proceeding it will inevitably raise a number of complex issues that must be worked out. In order to successfully negotiate this process it is important to be represented by an attorney with experience that is specific to divorce proceedings that involve businesses so that your assets are protected in a way that will ideally allow for the continuation of your endeavors. You worked hard to build up your company into what it is today, it only makes sense to protect what you have achieved.

Characterization

The first issue that needs to be addressed when a business is at stake in a divorce is to determine if it is marital or separate property. Businesses that are separate property typically will be protected during a divorce proceeding, while businesses that are determined to be marital property very likely will be subject to the divorce proceedings. If your business predated the marriage, it almost always will be considered separate property. This can, however, be challenged if during the marriage the business has grown in value significantly. Businesses that were passed down to a person through their family, inherited or gifted, are usually a similar situation, again depending on if significant additional value has been added during the marriage.

A more complex issue arises if the business was started with separate property funds, for example if the startup capital originated before the marriage or was gifted or inherited from one spouse's family. In these situations it is possible that the business will be determined to be separate property, however proving that commingled funds were not involved becomes a critical issue that is often difficult to prove.

Other Issues

In Texas, if it is determined that the business is marital property other issues will then come into play:

Valuation

- what is the business legitimately worth for the purposes of the division of assets?

Business Partners

- if the parties to the divorce are only partial owners of the business, the situation can potentially become more complicated. If co-owners' ownership interest or role in the business will affect the characterization or valuation of the business, it is possible that they will become involved in the proceedings to some degree. However, with an experienced legal team and the proper documentation to prove the legitimacy of other ownership interests, these matters are typically not overly problematic.

'Double-Dipping'

- one trick that a divorce attorney experienced in the disposition of businesses will be on guard for is 'double-dipping'. If a spouse seeks both half of a business' value and spousal support, which will partially come from the profits of the business, they will end up receiving more than half of the value of the business. This is just one example of unfair practices that your attorney must protect your interests against.

Attorneys Experienced With The Disposition of Businesses

At Clark Law Group, our knowledgeable legal team has the experience you need to safeguard your business interests during your divorce. Speak with one of our representatives today by telephone at 469-906-2266 or online to see how we can protect what you have worked so hard to build.