Divorce and Property Division in Texas: What Happens to the Family Business?

This blog post discusses divorce and property division, in which a business is involved in a Texas divorce. Divorce can be complicated. After the issue of child custody arrangements, the division of marital property usually tops the list of complications. A family business can make an already complicated process that much more difficult. A family business is often a symbol of all the hard work and commitment you have put into your family and your career, and walking away can be especially painful. If you are facing a divorce and own a family business, you need an experienced Houston divorce attorney.

What is Martial Property in Texas?

In Texas, the property you acquire during your marriage is generally considered marital property. Marital property is divided between you and your divorcing spouse in a way that the court deems “just and right.” (See Texas Family Code 7.001). However, the court’s determination of what is just and right may be at odds with your ideas of dividing your property. Coming to terms with the outcome can be especially difficult. Unless you and your spouse can hammer out an agreement related to your business, the court will make the determination for you.

Read this blog post to learn more about “Property and Debt Division in Texas: What you should Know.

How Do I Value the Family Business in a Texas Divorce?

It is difficult to come to an equitable division of a family business in a divorce if you do not have an accurate valuation of that business. The thing about business valuations, however, is that they can vary widely. While reputable business valuators should ultimately come to similar values, there is plenty of room for your spouse to bolster the business’s value or to minimize the business’s value – depending upon his or her motivations. In other words, obtaining one business valuation that accurately reflects your business’s value and that you can agree upon can be challenging. If you own a business, chances are you have substantial assets.  For a more detailed discussion, check out our article “High Asset Divorce in Texas, What you Need to Know“.

Businesses are Sometimes More than Monetary Value

When your divorce involves a business, it is essential to recognize that it likely has more than just monetary value. If you are involved in running the business, it is probably a labor of love that can be difficult to monetize. Further, the business provides you with a career and a means of supporting your family. This is something that a check written for an amount that equals roughly half the business’s value simply cannot do. If you are facing a divorce involving a family business, there is much to consider.

Options for Dividing a Family Business in a Texas Divorce

If your business is a going concern that provides for your family, you have options when it comes to your divorce:

  • You can continue running the business as a business partner who is not married. If you ran the business together as a married couple, you still have the requisite experience, skill, and commitment to doing so that you had before you were divorced. However, if your divorce is plagued by acrimony – which nearly any divorce can devolve into – this path forward is unlikely to be successful.
  • You can sell the business and split the proceeds. While this is often the cleanest approach, it has its inherent difficulties. The proceeds from such a sale can vary widely due to a fluctuating market and to your ability to find the right buyer at the right time. Ultimately, selling for the sole purpose of divorce can be a financial setback.
  • One of you can buy the other’s interest in the business. This option makes a lot of sense because it provides the business with continuity of ownership, guarantees that it will continue to be competently managed, and bypasses the need to worry about the market and find the right buyer right now.

The difficulty with this option is that it can be very hard to walk away from a business you have worked so hard to manage and grow. Additionally, suppose your business continues on the successful path you have helped set it on. In that case, your ex-spouse will likely reap greater rewards (than you may have been compensated for) by selling in a strong market to the right buyer, which could take years but could also happen soon after the divorce.

When it comes to divorce and your family business, there are so many angles to consider that it is nearly impossible to formulate a “right” answer. Instead, a dedicated divorce attorney will help you see the big picture, determine what options are likely to work best for you and your children, and move forward with purpose—knowing that you have made informed decisions in your pursuit of life after divorce.

The Family Business and Mediation

If your divorce proceeds to court, the judge will determine how the division of your family business will be handled, which is generally not in your best interests. If you and your divorcing spouse – with the guidance of your respective attorneys – cannot come to a somewhat mutually satisfactory agreement, formal mediation can help. The neutral mediator in the process will help both of you better understand your options and what will likely happen if you take the matter to court. Hammering out a decision together that helps preserve the integrity of the business you built together can be an important step forward in the divorce process in Texas.

Divorce being what it is, mediation does not always accomplish its intended results. Your experienced Houston divorce attorney will work closely with you throughout the process and will help you focus on what is best for you and your children—whether that means continuing with the mediation process or proceeding to court.

Read this blog post for more information on mediation: “Houston Divorce Mediation and why it is better than Trial

If You Are Facing a Divorce that Involves a Family Business, You Need an Experienced Houston Divorce Attorney

Few things complicate a divorce more than a family business, but experienced legal counsel will help you find a solution that works for you. The dedicated legal professionals at The Rudisel Law Firm, P.C., have the experience and fortitude to fight for your case’s best possible resolution. We care about your case and are here to help, so please complete an online evaluation or call us at 713-781-7775 today.

Please read the articles below for more valuable information on the divorce process in Texas.