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Dealing with a business during a divorce

On Behalf of | May 22, 2019 | Divorce

Businesses that are established during the course of a marriage are usually considered part of the marital estate, which can lead to highly contentious property division negotiations when their owners divorce. This is especially true in states like Texas with strict community property laws that require marital assets to be divided equally. In these situations, divorcing spouses can either sell the business, continue to run the company as before, or one spouse can buy the other out.

Putting a value on a family-owned business is rarely straightforward, and independent appraisers may be called in to provide an objective estimate. Experts could also scrutinize company records to make sure that business owners have not taken steps designed to make their commercial ventures appear less successful in anticipation of divorce proceedings. When one spouse wants to buy the other’s share of a business but the necessary funds are not available, the company may have to be sold.

The process of selling a business can lead to strife during divorce proceedings when one spouse wants to resolve matters quickly and the other spouse wishes to wait for higher offers. This can lead to a fierce debate over what is and what is not an acceptable offer. These issues can be even more difficult to untangle when cash flow is a problem or the seasonal nature of a business can impact the timing of its sale.

When spouses run a business together and one of them chooses to buy the other out during a divorce, experienced family law attorneys may suggest including a non-compete clause in the agreement. This kind of provision could stop the selling spouse from poaching customers from their former husband or wife or prevent them from opening a competing business for a specified period of time or within a designated area.