For many business owners and entrepreneurs, their business is not only imperative to their financial well-being but is also a large part of their identity. This can raise obvious concerns when divorce is on the horizon. And when a couple owns a large business or corporation, or the business assets are complex in nature, the thought of dividing business assets can be overwhelming. Nonetheless, dividing complex business assets is often required, and, therefore, it is imperative that spouses understand how Texas law handles these situations.
WHAT ARE COMPLEX BUSINESS ASSETS?
Complex business assets are assets that belong to or are associated with a business that do not necessarily lend themselves to simple valuation or division. For example, the monetary value of a business’s goodwill or intellectual property rights are two common examples of complex business assets.
ARE BUSINESS ASSETS DIVIDED BETWEEN SPOUSES IN A TEXAS DIVORCE?
The short answer is it depends. Texas is a community property state. So, any assets that are acquired by either spouse during the marriage are presumed to be community property, which is subject to division upon divorce. However, determining whether complex business assets are community property is not always a straightforward endeavor. And even then, this is only the first question courts must answer when hearing a divorce involving complex business assets.
WHAT DO TEXAS COURTS CONSIDER WHEN DIVIDING COMPLEX BUSINESS ASSETS?
Several considerations go into whether business assets are subject to division and, if so, how the court will divide the assets. As a preliminary matter, the court must first determine whether the business assets constitute community or separate property.
Under Texas Family Code § 3.001, separate assets include 1.) property owned before marriage, 2.) property that was inherited or gifted to only one spouse, and 3.) most proceeds from a personal injury award or settlement obtained before or during the marriage. However, all other property is generally considered community property.
If business assets are considered community property, the court must divide them in a way that is just and equitable. However, some types of businesses are more easily divided than others, and other types of businesses typically end up with the spouse who created the business. For example, if one spouse operates a sole proprietorship that doesn’t own significant business assets, it will typically go to the spouse named as the sole proprietor, as there is little economic value to the other spouse. However, large companies may require a business valuation expert to determine the value of the business.
Additionally, some businesses, such as franchises, medical offices, or law firms, may have restrictions on who can own the entity, which can add to the complexity of a divorce.
Another consideration is what role each spouse played in the creation and operation of the business. While Texas courts favor an arrangement that keeps a business profitable, they must balance that preference with what is fair to each spouse. Thus, the court may come up with an arrangement where it grants all business assets to one spouse but most of the couple’s remaining real property to the other spouse.
SPEAK WITH AN EXPERIENCED DALLAS BUSINESS ASSET DIVORCE LAWYER ABOUT YOUR SITUATION TODAY
If you believe that a divorce is in your future and are concerned about how it will affect your business interests, it is essential to work with a knowledgeable attorney who is immediately available to start protecting your interests. A knowledgeable Texas divorce attorney can provide you with a better sense of how a court might view your business and connect you with the expert witnesses needed to come to the best possible solution for you—and your business. To learn more, call the offices of McClure Law Group at 214.692.8200 to schedule a no-obligation consultation.