What Happens to a Shared Business in the Event of a Divorce?

Whether you own a business independently or you and your spouse own it together, you may have questions about how that asset is handled in a divorce. Entering into a divorce with an asset like a business can be nerve-racking. You may be unsure how the asset will be divided and what will happen to the business moving forward. Let’s take a look.

How is a business divided in a Texas divorce?

A business is a complicated property matter, which really just means that a fair market value isn’t easily or readily determined. Establishing the company’s valuation can be complicated due to many different factors. A factor that could complicate the valuation is if the spouse does not own the business individually but instead, it is held within an entity such as a corporation, a partnership, or a limited liability company. Other complicating factors could be if the spouse has a business partner instead of owning the business 100% or the asset to be valued is held inside a trust.

If you have a written agreement for the business

Some spouses will have a written agreement that they’ve entered into and decide within that agreement how they will value the business in the event of their divorce. In this case, the courts, under Texas law, will follow the valuation the owners have agreed upon.

If you don’t have a written agreement

Without a written agreement, the process of establishing the value of the company or the value of a partner’s ownership in the event of a divorce is more complicated. There are a few ways you can navigate these complications.

You can hire a certified accountant who is a valuation specialist. This specialist will use a court-approved methodology for business valuation that follows the Internal Revenue Service regulations for valuing a business when the owner dies.

You may also rely on the court. In the event that your divorce goes to trial, the judge has to make a determination as to what is the value of the marital interest in the business.

Need help?

Hire an experienced Texas family law attorney immediately. We’re Proffitt & Associates, and we have your back. We specialize in family law in Houston and the greater Houston area. Request your free one-hour consultation today.