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Small business owners may face difficult divorce problems

On Behalf of | Jun 24, 2021 | Divorce |

Many couples in the greater Houston area are involved in a small or other family-owned business.

Indeed, for many Texas families, their own businesses are the source of their livelihood, and they may have considerable wealth invested in them.

It should come as no surprise, then, that League City couples who are going through a divorce may have some considerable disagreements about whether and how to divide a family business.

A business may or may not be community property under Texas law

Texas is a community property state, which means that if an asset, including a business, was acquired during a marriage, it will be subject to a division.

Still, there may be some cases in which a person could argue that she should be able to keep her interest in a family-held business outright.

Moreover, even if a business is community property, the court does not have to divide it 50-50 between the spouses.

Putting a value on a small business can be tricky

There also may be questions about how much a small business is worth.

Figuring the re-sale value of the business is important during the divorce. Even if the couple does not plan to sell their interest in the business, the value will guide the court’s decision about how to divide it.

Business valuation for a privately held company is generally a matter for appraisers or other experts. Still, it is certainly worthwhile for an owner to have a ballpark estimate of their business’s value when going into a divorce proceeding.

While important, the expert’s opinion on business value is not beyond dispute. Experts have to make a lot of assumptions when giving their opinion on a company’s value, and it is fair for a person negotiating or litigating a divorce to question those assumptions.

Actually dividing the business can be done in a number of ways

Finally, there may be practical problems with actually dividing the business. If, for example, only one spouse wants to keep running the business, she may have to get a loan or figure out some way to buy out her ex-spouse’s share or may just have to agree to continue working as a business associate with her ex-spouse.