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Dividing a family-run business during divorce

Divorce creates a multitude of challenges, emotionally and financially. One of the most crucial considerations is dividing marital assets. In Texas, couples divide all assets acquired during the course of a marriage equally.

For high-asset couples, more complications arise when a family-owned business is included on the list of assets owned by both parties. The first step is for each spouse to decide what, if any, involvement they want going forward.

Dealing with a divorce dilemma

Before dividing a company, it’s essential to determine how much it’s worth by seeking an unbiased third-party appraisal. Once that figure is known, couples typically have three options:

  • Both spouses sell: In some cases, spouses both want a fresh start and decide to put the company up for sale and split the proceeds. One of the drawbacks of this route is that it can prolong the divorce process waiting for a buyer while spouses must continue to work together until it’s sold.
  • Both spouses retain ownership: This option may be the most reasonable method for couples who are both invested emotionally and financially in a business, want to stay involved and remain on friendly terms. However, many divorcing couples find it hard to remain business partners.
  • One spouse buys the company: This is the most common method and is generally seen as tax-efficient since the direct purchase of shares can be considered a transfer of property. If the buying spouse doesn’t have enough cash to purchase it outright, a settlement note can be created to pay it off over time.

Weighing the potential outcomes

There is no single best option for divorcing spouses when deciding on the future of a family-owned business. Many have no problem continuing a working relationship even though their marriage has come to an end.

An experienced family law attorney here in Texas can help you find the right approach and determine the benefits and potential downsides of selling or keeping a business that makes the most sense for your emotional and financial well-being.

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