Why family businesses are often a casualty of divorce

This article looks at what divorce means for the future of a business that is owned by both spouses.

Millions of married couples own and operate businesses together. In fact, according to the Wall Street Journal, about 1.4 million businesses are jointly owned and equally operated by husbands and wives, with a further 1.7 million jointly owned businesses primarily operated by husbands and another 600,000 primarily operated by wives. Of course, many of those marriages end in divorce and when they do an issue that often arises is determining the future of the business. For couples who are also business partners, divorce provides both challenges and opportunities.

Understand what counts as property

Texas is a community property state, meaning that most property that either spouse acquires during the marriage is considered to be the property of both spouses when they divorce. As the Houston Business Journal points out, Texas’ community property laws can have a big impact on one’s business. For example, even if only one spouse owns the business and established it before his or her marriage, the increase in value that business has experienced over the course of the marriage may belong to both spouses. Some business structures, however, may protect the business from the fallout of a divorce.

Ending the business

Many people who own a small business may find it easier to end their stake in the business rather than to keep it going. This may be a good option if it would be too expensive to buy out the other spouse’s share in the business or if one was not the primary operator of the business. A business valuation will have to be conducted to ensure that each party gets a fair price for his or her share in the business.

Keeping the business going

Divorce does not have to mean the end of a family business. Many jointly-owned businesses are primarily operated by one spouse and that spouse can keep the business operating relatively easily after their divorce. For example, if a married couple owns a dentistry business, but it is the wife who is the dentist while the husband takes care of the accounting, then it would make sense for the wife to buy out the ex-husband’s share of the business and to find a new employee to take on the accounting duties.

In rare cases couples who are divorcing can continue running their business together. Of course, this situation is often too emotionally draining to work in practice, but it may make sense if couples can keep their personal lives out of the workplace or if they are waiting for market conditions to improve so that they can sell their business at a better price.

Divorce help

For those who are going through a divorce it is important to get legal help as soon as possible. Divorce can be devastating both emotionally and financially, but a family law attorney will ensure that a client’s best interests are put first. With an experienced attorney on hand, clients will have the guidance they need to get through what is an often difficult experience.