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Options for Divorcing Business Owners

by | Feb 10, 2018 | Divorce

When couples get a divorce many issues need solved. A divorce for business owners increases the complications of the matter. A business not only provides income, it also gets viewed as property. This property, like all others, can be divided between the spouses. However, there are ways to work these issues out.

Co-Ownership

This method simplifies the matter. If spouses maintain the ability, they continue owning the business together. This option provides simplification, but is difficult in practice. The spouses must maintain a working business relationship for this method to succeed. If trust becomes an issue, or emotions run rampant, which they do in divorces at times, this method will fail.

Sell and Split the Profits

This option also seems simple, yet has complications. This agreement sells a business to a third-party and the divorced couple split the profits. However, if one member doesn’t want to sell, this isn’t an option. Even if both parties agree to sell, it might take months to sell the business. If the couple wants a clean split, with no attachments, this may cause issues.

Buy-Out

The last option allows one member to buy the half from the other. This often works best when one spouse has no interest in maintaining the business while the other wishes to keep the business going. This option is available if the buyer has the resources to buy out the spouse. There are also options to use other assets like other property to offset the price of the buy-out.

Requirements to Consider

All three of these options have requirements. First, the business needs to be defined as a community property or separate property. A separate property gets started before the marriage, while community gets started during the marriage. This sounds like an easy definition, but gets complicated when it comes to valuation of the business. A separate property often has community aspects. A spouse that spends time, or invests money in growing the business has an interest. It takes experienced attorneys to define the property type.

The business value needs to be obtained as well. This is done by a professional appraiser familiar with the business type and valuation methods. They usually use three methods. The market approach bases value on similar businesses sold. The income approach looks at the cash flow history and models expected income or profits. The final method focuses on assets and liabilities of the business, called the asset approach.

Goodwill also plays a role. In Texas, goodwill gets split into personal goodwill and enterprise goodwill during a divorce. Personal goodwill involves the person running the business, and their reputation. Enterprise goodwill involves the name and reputation of the business. This gets treated like property. Enterprise goodwill is subjected to division in a divorce, while personal goodwill is not. This consideration gets overlooked at times but has importance.

The Collaborative Divorce Process

This process gives the spouses an environment to discuss these options, without going into litigation. The meetings take place without a court, which has many benefits. Instead of focusing on getting the biggest piece of the pie, the focus is on the individual and mutual goals of the couple. It also provides a method to avoid long court battles and destroying relationships within the family. The couple works with individual lawyers to arrive at an agreement customized to benefit all parties. Many recommend this option instead of taking issues to court.

A divorce has the potential to devastate individuals for a number of reasons. Divorcing business owners face extra challenges. They also face the possible end of a business built before or during the relationship. But there are options and help available. Contact us today if you are facing this situation. Let us help you get through this difficult time with the best possible outcome.

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512-478-1011

7500 Rialto Blvd., Bldg. 1
Suite 250
Austin, TX 78735
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Family Focused.
Solution Oriented.

Family Focused. Solution Oriented.

Resolving family law matters while preserving family relationships.

Family Focused. Solution Oriented.

Our goal is to help folks resolve their family law issues in a way that protects their interests and preserves their family ties. Most family law cases can be difficult from an emotional and financial perspective. We believe in reducing the emotional and financial stress by offering alternative options to resolving their disputes, such as mediation. We enjoy helping people who are interested in working together to find creative solutions to their circumstances.

We provide a variety of services to clients from all walks of life. We offer both full-scope and limited-scope representation so that you may choose the way you want to allocate your resources. We are open to exploring alternative fee arrangements, in appropriate cases. Contact us to inquire.

Helping You Pursue Alternative Conflict Resolution Methods

Too often clients in family law cases spend substantial sums of money arguing about issues in court and often feel worse at the end of their case than before they started. At The Law Office Of Tim Whitten, P.C., we are sensitive to this reality. This is why we explore alternatives to the traditional litigation approach with each client as we help him or her identify long-term legal interests and goals. After our representation begins, we strive to be available and responsive to each client to ensure that we stay on track with that client’s interests and goals.

Contact the Law Office of Tim Whitten

If you are in need of an experienced family law attorney and you believe that our philosophy may work for you, contact The Law Office Of Tim Whitten, P.C. We are dedicated to helping you and your family move forward peacefully. Call 512-478-1011 to speak with our firm today.

MORE THAN 25 YEARS OF PROFESSIONAL EXPERIENCE

Our primary attorney, Tim Whitten, is certified as a Family Law Specialist by the Texas Board of Legal Specialization. This means that he has experience in multiple case types, demonstrated proficiency, and mastery in some of the technical aspects of family law.

Contact Us Today

For a Confidential Consultation

Contact Us

512-478-1011

7500 Rialto Blvd., Bldg. 1
Suite 250
Austin, TX 78735
Map + Directions

Family Focused.
Solution Oriented.