Divorce concerns for small business owners

On Behalf of | Mar 30, 2020 | Firm News |

A divorce can always be a complex financial proposition, especially in Texas, a community property state. While the emotional and personal aspects may come to the forefront, the financial effects may last the longest after the end of the marriage is finalized. While these concerns are true for everyone, small business owners may be especially concerned. When spouses share ownership in a privately held company, the divorce can have a major impact on its continued functioning. In some cases, people have had to sell their businesses in order to divide the proceeds.

However, it is possible for some business owners also to negotiate a successful property division settlement during a divorce. In most cases, one spouse is more heavily involved in the business and wants to keep it going after the marriage ends. If the couple has sufficient assets, the other spouse can be compensated for their interests in the business by receiving a greater share of family real estate, investment accounts or other assets. If they do not have enough marital assets to separate out the business, the spouses may negotiate a buy-out over time.

The spouse keeping the business will make a series of payments until the other spouse’s interest is extinguished, with the departing spouse losing equity throughout while receiving this form of spousal support. In either case, both parties will also want to negotiate agreements to handle business decision-making during this period and transfer intellectual property, as well as to shield the departing spouse from business litigation.

Business owners can emerge successfully from a divorce without burdening their companies with excessive debt or a bad relationship. A family law attorney may help an entrepreneur to address issues like property division and alimony.