April 10, 2015 | Share
How to Protect a Business During Divorce
During a divorce, many things are up in the air. Who will get the house, the cars, the retirement accounts? If you and your spouse own a business, the business will become part of the divorce proceedings too.
Protecting your business is crucial and begins as soon as you make the decision to divorce. Contact a McKinney divorce attorney at Nordhaus Walpole PLLC for help protecting everything you have worked to build.
How Much of Your Business Is Community Property in Texas?
The most reliable way for us to strategize ways to protect your business during a divorce in Texas is to consider how much (or if all) of the business will be considered separate or community property.
Family law considers your business separate if it was created before you were married, as long as you kept it separate. If you created the business after you were married, it is likely that it will be considered part of a community marital estate.
Even if it was created during singlehood, certain decisions make it so the courts consider all or part of it community property. Some of these things include changes to the business structure or organization or adding owners to the business.
Separate businesses may still take a hit in a divorce based on decisions you made when your marriage was strong, too. As Entrepreneur points out, if you have been paying yourself a salary from the business, your salary is likely to be considered community property.
Conversely, if you paid yourself a low salary hoping that a later business sale would earn you a large sum, your spouse may end up with more of the business, because he or she sacrificed the benefit of your salary for a later community payout.
Talk to your divorce attorney about changes you may be able to make to your business now to mitigate losses or protect your efforts from being distributed to your spouse.
Determining the Distribution of Your Business
A community-property business is distributed based on the specific factors of the marriage and the contribution of each spouse to the business and the marriage, but first the value of the business must be determined.
Usually, you and your spouse’s divorce lawyers will work with an expert or set of experts to provide an objective value to the business. The expert may be a Certified Public Accountant or other business valuation expert.
Depending on your situation, once you have a numerical value, you may simply want to offer certain business assets or a lump sum of cash to your spouse in return for keeping the majority of the business intact as yours.
Other more complex situations involve two spouses who have worked equally hard to grow a successful business. In these instances, a buyout is still a possibility. Sometimes, one spouse may take certain assets, collections or debts or you two may split respective accounts between you.
Again, an experienced Texas divorce attorney is vital to creating the strategies that protect the overall business and its potential after your divorce. Ask the attorneys at Nordhaus Walpole PLLC for help today.
Categories: Family Law & Divorce