November 01, 2013 /24-7PressRelease/
-- Unique issues await divorcing small business owners in Texas
Divorce is a chaotic, emotional time. Bags are being packed, moves are being made, and the spouses are coming to terms with the fact that their marriage has ended. Sometimes people, namely children, are caught in the middle. Certain assets - among them marital property like the family home, retirement accounts of each party and assets associated with a small or family-owned business - are stuck in the middle as well.
Texas property division
Like several other states, Texas is a community property state. This means that, under Texas law, property is generally split 50/50 unless a prenuptial or post-nuptial agreement specifies otherwise. This is not to say that the spouses could not work out a system by which particular assets remain intact in exchange for other assets, but the possibility that all assets (a small business included) might need to be divided is a real concern.
As stated, it is possible to avoid the legal constraints of divorce
-related property division by signing an enforceable premarital agreement. Or, one could be signed after the marriage that serves the same purpose. Both are valid legal documents (provided they meet the same legal criteria required for other types of contracts), and a post-nuptial agreement might even be more helpful, since it can also include assets that the parties have acquired together during the marriage.
What does this mean for small businesses?
Well, without a valid prenuptial agreement or other contract that specifically protects the business from being considered part of the marital estate, each spouse is likely entitled to half of the value of the business. Given the financial details involved, this might result in the sale of the business (or the liquidation of other valuable assets) so that one spouse can "buy out" the other.
Even if a sale isn't necessary, the act of putting a market value on a small business is, in itself, difficult. Financial experts and business valuation specialists will likely need to be called in to determine what the company is worth. Then, the couple's financial situation must be carefully analyzed to discern if it is necessary to sell the business, or if another property distribution method could prevent that.
Small business assets can also make determining child support
or spousal support payments much more difficult, even after a property settlement agreement has been signed because these payments are tied to the income received from the business, not the value of the business itself. The difficulty in discovering the true income of a business owner (versus the profit of his or her business) could drag out the divorce process, resulting in higher court costs and related fees.
Getting the answers you need
If you are a small business owner who is planning to divorce, you likely have concerns. You could be worried about whether the business itself will survive, particularly if it has been passed down in the family or has multiple employees. You could also be wondering about the added expense of having the business valued, or if there are alternate dispute resolution methods that could help you and your spouse come to an agreement without putting the company in jeopardy. Regardless of your questions and concerns about the interplay of divorce and small businesses, an experienced Texas family law attorney can help.
Article provided by Law Office of Tim Whitten
Visit us at www.whitten-law.com