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Is your Business Community Property or Separate Property?

What happens to your business if you are getting divorced? This can be one of the most important and complex issues you will face. The first question to ask is community or separate property. In other words, is your business Community Property or Separate Property. This is a highly complex question which is best left for a different blog post.

If your business is Separate Property, then you have won most of the battle. But let’s focus on what happens when it is Community Property. At that point, it is not ‘your’ business anymore, even if you have done all the work in the it. That can be very frustrating, but that is the way the law works here in Texas.

Court Decision

Very few Courts want to leave a business with owners who are divorced. So one of the main problems in a divorce with a business is that one side has to be bought out. Therefore, valuation is key. Valuing it is very difficult, unless it is traded on the stock market. Fighting over the valuation can take quite a bit of time and effort. Usually each side hires a valuation expert, who typically (magically!) come up with valuations that are different and favor the side that hired them.

Courts faced with valuation issues typically find a valuation somewhere between the two expert opinions. However, if one expert is more convincing than the other, the Court is certainly free to rule for one side or the other.

Sometimes the Court will order the sale of the business, since that may be the only way to get one side or the other to get paid out. Sometimes a Receiver will be appointed.

Be sure to hire a competent attorney. I do have experience handling complex divorces with businesses. I also have owned (and still own) several businesses, so I am familiar with the practical aspects of businesses.

 

 

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  • Houston: 713.275.7830
  • Austin: 512.320.9160
  • Dallas: 469.250.0447