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Business owner divorce

What Happens When Married Business Partners Divorce?

One of the key components of a divorce is the division of property, and when you and your spouse are also business partners, this is where the big decisions about the future of your business will take place. Depending on the value of the business, each spouse’s wishes, when the business was founded, and several other factors, the business might carry on under joint ownership, or it could be awarded to one party, or ordered sold to a third party.

In short, there are several different outcomes possible for divorcing business owners, but the important thing to remember is that you have choices. For most business owners, retaining the business is of the utmost importance, which is why it is important to discuss your options with your attorney so you understand which of your available options would serve you best in the future.

How Do Courts Value Businesses in Property Division?

Texas law categorizes all property in a divorce as either community property, part of the marital estate, or separate property. A business founded prior to the marriage would be considered the separate property of that spouse, whereas any business started during the marriage would be considered community property shared by both spouses. That said, even if the company was founded before the marriage, a portion of it might still be considered community property depending on the increase in value during the marriage.

Common Solutions for Business Owners After Divorce

If you do not already have a premarital agreement to guide you, your business could go one of many different ways in a divorce. Married business owners might choose any of the following courses of action:

  • One spouse buys the other out. If one spouse is willing to sell their portion of the business that is considered community property, the other can buy them out and retain complete ownership.
  • One spouse accepts other equivalent assets while the other takes ownership of the business. The spouse who wishes to retain the business can also offer the other spouse other assets from their community property equivalent to the value of the business to gain ownership.
  • Continue operating as co-owners. If the split was amicable, and both spouses trust the other to act in the business’s best interests, operating the business as co-owners might be a great option. In this scenario, it is important to have an operating agreement in place that clearly defines the roles of each spouse after the divorce.
  • Splitting the business. Although not ideal, some may choose to split the business into two separate entities. However, this option can be challenging because it often leaves those two entities as competitors.
  • Selling the business. For most business owners, selling off their business is a last resort. However, if no other options remain, it might be best to sell the business or dissolve it entirely.

Call an Attorney for Help, Today

Going through a divorce is never easy, but the process might be that much more stressful if you and your spouse are partners in more than just the personal sense. If you and your spouse are business partners, you are probably concerned about what might happen to your business in a divorce, which is why you need to discuss your rights with a lawyer right away.

Protect your business interests and reach out to our team at O’Neil Wysocki to speak with our firm.