Balch Springs, TX asked in Divorce and Business Law for Texas

Q: I'm going through divorce and own a small business. The business is in my name. Do I have to split the profits with my e

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1 Lawyer Answer
Jennifer S. Hargrave
Jennifer S. Hargrave
  • Dallas, TX
  • Licensed in Texas

A: Congratulations on being a business owner!

The business will be valued as part of your overall estate. The profits generated from your business can factor in to the overall value of your business. How your business is valued will depend on many factors, including the type of business entity (e.g., is it a corporation, partnership, LLC or sole proprietorship). Is the type of business one that would be sellable -- is it just you where you are hired for your specialized skill and personal relationships (i.e., personal goodwill), or is it a well known brand where it doesn't matter much whether or not you are still working for the business (i.e., business goodwill).

Also, there are other factors to consider when dividing a business. If your business was formed before marriage, then it will likely be separate property and the value will not be considered in the overall division. If your business was formed during the marriage, then the value of your business will be part of the community property estate that gets divided.

Once the business is awarded to you as part of the divorce, you will generally not be splitting future profits with your ex-spouse. There are exceptions, however, based on how you structure the overall deal. For some business owners, they may not have enough cash to pay the other side his/her share of the value of the business. Sometimes, it makes sense for parties to enter into a contractual arrangement where they will pay off the debt owed for the other spouse's interest over time. Or they may choose to continue sharing in the ownership of the business, in which case future profits would be divided.

However you come to the resolution, you want to make sure you have protected your business, as it is likely a source of livelihood for you and your family in the future. It is worth it to spend some time with a divorce lawyer who can offer you specific advice for your unique situation (spoken like a true lawyer!).

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