Protecting My Business During a Divorce in Texas
Starting a business requires passion, perseverance, and hard work. It can be your life’s dream to nurture that business and watch it grow into a thriving enterprise. But what happens when life takes an unexpected turn and you find yourself facing divorce? Now your business that you poured your heart and soul into building is potentially at risk. You need to take steps to protect your business during the divorce process. Here are some tips from divorce lawyer Texas on how you can shield your business so you can move forward.
Evaluate Your Current Business Structure
The first thing you need to do is closely evaluate how your business is currently structured from a legal perspective. This includes examining the business formation and ownership documentation.
Is the business set up as a sole proprietorship, partnership, corporation or LLC? The business structure affects ownership interests.
Are you the sole owner or do you have business partners? If you have partners, what percentage ownership does each partner have?
Is there a shareholders agreement that specifies ownership details? This is especially important for corporation/LLC.
Are assets jointly owned between spouses or separate property? The divorce classification determines division.
Thoroughly understanding your current business structure provides the framework to then take protective steps. Consult with your divorce lawyer Texas to analyze the situation.
Set Up Additional Business Protection Measures
Based on your business analysis, work with your attorney to set up additional legal protection around your business assets in a divorce.
Separate property ownership - If allowed by state law, convert jointly owned property to separate property owned just by you.
Post-nuptial agreement - If no pre-nup, create post-nup agreement that confirms separate property assets.
Buy-Sell Agreement - Legally binding contract that prevents business interest transfer to ex-spouse.
Amend Partnership Terms - Revise partnership agreement to limit partner changes.
LLC/Trust Restructuring - Restructure LLC shares ownership/change trustee.
Lease Assignment - If business property is leased, assign lease to separate entity.
Develop Preventative Measures With Employees
Meet with key executives and employees on a confidential basis. Put plans and precautions in place in order to maintain business operations.
Change Account Access - Modify bank account access, credit cards, online account credentials.
Tighten Financial Controls - Add oversight procedures for expenditures, inventory controls.
Limit Information Access - Adjust employee access to sensitive information on a need-to-know basis.
Review HR Policies - Ensure HR policies protect proprietary information and prevent improper email/data sharing.
Plan For Your Absence - Cross-train employees and document procedures in case you need to step away for legal matters.
Build Your Business Valuation Case
A primary issue in divorce is determining the value of all assets, including your business. Take proactive steps to establish an accurate business valuation.
Document Finances - Gather 5 years of tax returns, financial statements, business agreements.
Perform Valuation - Hire a certified business valuation expert to assess your business value.
Normalize Temporary Issues - Factor in and explain any temporary business performance problems.
Highlight Intangible Value - Identify any special intangibles such as patents, trademarks, clientele.
Presenting a well-supported business valuation and explaining the reasoning will help achieve a fair outcome.
Think Defensively With Future Business Decisions
Be extra diligent moving forward with business decisions and implement defensive strategies.
Scrutinize business transactions that could reduce business value.
Avoid commingling personal and business assets/accounts.
Maintain detailed records of business expenditures.
Hold off on major business changes until divorce finalized.
Negotiate a Balanced Divorce Settlement
Work closely with your divorce lawyer Texas to negotiate a divorce settlement regarding the business that is balanced based on facts.
Seek a neutral third-party business valuation expert.
Argue against unrealistic demands using documentation.
Request settlement options allowing you to keep controlling business interest.
Offer alternatives such as lump sum payment or post-divorce income percentage.
Finalize divorce details in decree enforceable by court if needed.
With proper planning and legal guidance, protecting your business interests during divorce is possible. Consult a knowledgeable divorce attorney in Texas serving high asset and complex business divorce cases. Safeguarding your business legacy and livelihood requires experience and knowledge.
Key Steps To Protect Your Business During Divorce:
Analyze current business structure and ownership
Set up preventative business protection measures
Develop contingency plans with employees
Build defensible business valuation case
Make cautious business decisions during process
Negotiate equitable divorce settlement
Frequently Asked Questions
1. Can a judge award part of my business to my spouse?
Yes, a judge can award partial business ownership to a spouse if deemed marital property. Much depends on how the business assets are classified by state law.
2. Should I continue business as usual during the divorce?
It's wise to be cautious with major business decisions until the divorce is finalized, as your spouse may argue any changes aim to hide assets.
3. What if my spouse makes false claims about my business?
Refute unreasonable claims with documentation on business valuation, finances, operations. Hire a forensic accountant if needed.
4. What if we jointly own a business - can I dissolve it?
You may be able to dissolve a jointly owned business, but talk to your lawyer first about the implications. Selling may be an alternative.
5. Does business income get factored into child/spousal support?
Yes, business income is considered for support determinations. Be prepared to disclose business tax returns.
Contacting The Proper Divorce Attorney
A top female divorce attorney can be empathic and serve as an advocate for you.