Dividing a Business in a Divorce in Dallas

Protecting assets in a divorce is understandably a concern for many who are going through the process. During the divorce process in Texas, if the spouses cannot come to an agreement on property division, a judge will award specific portions of the assets to each spouse as he or she sees fit, according to the law.

This does not necessarily mean that the division will be equal, as one spouse may receive more in order to support children or for other reasons. Both spouses will ultimately receive a portion of the marital estate in a proportion that the judge deems fair and reasonable.

This process becomes cloudier, however, when the spouses own a joint business, and which one or both spouses may wish to keep intact. In this case, there are certain steps that both spouses can take to ensure the business stays protected throughout the entire process. Learn more about dividing a business in a divorce in Dallas.

Collective Ownership after the Divorce

This option is available to spouses who separate amicably, and who believe they can maintain a professional relationship after the divorce. By choosing to carry on collectively owning the joint business, spouses can continue to work together to grow the operation, without one or either spouses being forced to give up ownership.

Of course, it is important to note that this option may only work well for divorced spouses who are able to cooperate in owning the business; those who experienced a contentious divorce may wish to pursue a different avenue.

Buyout of One Spouse’s Shares

If the spouses don’t wish to continue running the business together, but would like to see it operate in the future, they can achieve this by allowing one spouse to buy the other’s interest in the company. In this situation, by purchasing the other spouse’s interest or shares in the company, one spouse can continue operating the company.

Depending on the specifics of the divorce, as well as the division of property agreement, the cost of the spouse’s shares in the business could be offset by the selling spouse receiving a larger portion of cash, property, or other marital assets.

This option does benefit both spouses, with one receiving full ownership over the business, and the other acquiring additional assets. If the spouses cannot agree on who will own the business after the divorce, however, they may instead be required to sell the entire operation.

Selling the Joint Business

If the spouses choose to sell the joint business, they will first need to decide collectively how much it is worth, and what amount of compensation they should pursue. This is most often achieved by performing a business evaluation, which can be conducted in one of three main ways, as highlighted by the National Federation of Independent Business, and which will result in a relatively accurate calculation of the business’s worth.

The first method, known as the asset approach, entails calculating all of the assets currently possessed by the business. This produces an accurate picture of what the business is currently worth, although it does not take into account future growth.

The second method, the income approach, involves adding the net present value of the benefit stream, and can include expected economic benefits as well.

The third method, the market approach, is based on the comparison of the business to other, similar businesses in the current market. Although this is a subjective evaluation, it may be to the spouses’ benefit if the business type currently has a high demand.

Let Us Help You Protect Your Business

Divorce and business ownership can be complex, and there is no single option suitable for all divorcing spouses who own a business, since each divorce presents unique challenges. If you need help protecting your joint business in a divorce in Dallas, though, our attorneys can help. At the Law Offices of Julie Johnson, PLLC, we are prepared to protect your interests throughout the entire divorce process. Contact us today for a consultation at 214-265-7630.