Important Divorce Concerns For Texas Small Business Owners!

One of the more challenging types of divorce that Texas divorce law firms deal with is one in which there is a small business involved.

Since Texas is a community property state, divorce lawyers find that a small business in the family may fall under that rule and be subject to division.

Spouses who are planning to divorce must discuss their business with an experienced divorce attorney to understand how the state views their specific business and what will happen to it during the divorce.

When Was The Business Formed?

The first question that divorcing business owners must reveal to their divorce law firm is when the business was formed, as this can immediately dictate whether the business is subject to community property laws or not.

If the business was formed before the marriage, a divorce lawyer can consider it personal property that is not subject to community property laws unless there are other factors that apply.

What Type of Business Entity Is It?

Next, divorce attorneys must know whether the business is a sole proprietorship, corporation, or partnership and if there is another partner as this can affect any business that was formed post-marriage.

If spouses are partners, all community property laws apply.

Depending on when incorporation was done, divorce law firms advise that property division may still apply, as changes in business status during a marriage usually change it from personal to marital property.

If one spouse is more involved in the business operation than the other, this can also be a factor when determining whether the business must be divided among spouses.

What Attracts The Customers?

To determine the worth of a small business when community property laws apply, divorce lawyers must seek appraisal by valuation experts.

One of the important factors weighed when determining what makes the business successful is what draws in the customers.

When it is an owner’s personal reputation that attracts customers, this personal goodwill is considered an intangible value that the company depends on, which makes it impossible to split the business value as its value depends on that one person.

If the customers come based on the reputation of the business name itself, valuation as community property is higher and can more easily be divided.

This is one of the more complex ideas that divorce attorneys must work through when helping business-owner clients determine the worth of their companies and find a feasible way to divide the assets.

How Might the Business Be Divided?

Depending on the value, how the company operates, the type of business, and many other factors, small businesses subject to property division can be divided in multiple ways.

One spouse can buy out the other spouse’s portion, the court may order the company to be liquidated and divided, or divorce lawyers can work with clients on more creative solutions that involve weighing other marital property in exchange for business ownership.

Texas Small Business Owners Need Skilled Divorce Lawyers

Some spouse-owned small businesses qualify as marital property, subjecting them to Texas’s community property rules when divorcing.

When a small business is involved, spouses should seek a divorce law firm that understands family business properties and how they must be divided in a divorce.

Divorce attorneys with access to the business and financial professionals that can properly value the business and negotiate on ownership are an essential part of the process to prevent legal issues going forward.