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Business ownership may make property division more complex

On Behalf of | Jun 6, 2014 | Firm News

It is easy to think of the house, the car, investments and similar assets that may be addressed in a property division portion of a Texas divorce (the use of the singular form of the words car and house is intended for simplicity in the blog post – – many marriages have complex potential marital estates). There may be issues associated with work that can have impact in a property settlement; many people have retirement plans or pensions through work that may fall within the marital estate.

Taking the work concept a step further, what if a family business exists?

The issues can become more complex. There is no one-size-fits all definition of a family business when it comes to a divorce. Each business may have nuances, as each marriage may also have nuances.

One spouse may seemingly have no direct influence over a business in some marriages, while spouses may have started a company together during the course of the marriage. Professionals who own shares in a professional association also may have value in that ownership interest.

Some people see that these concepts could come into play long before the idea of divorce has entered anyone’s mind. Prenuptial or postnuptial agreements in Texas may outline how business-related issues should be dealt with if the marriage breaks down. But, in many cases, a divorcing spouse may not have an agreement in place, and the battle over property division may begin.

Notably, each situation may have unique circumstances that can impact the available options. An important step in determining what choices are available when a business is involved may center on the valuation of the company. Fair market value is the general standard, but determining the worth of a privately held business may take complex legal and forensic accounting analysis.

Similarly, the debt structure of the business, especially in a family-owned entity, may have significant impact on property settlement negotiations.

Source: Source: Entrepreneur, “‘I’m Getting Divorced, and My Spouse Owns Part of My Company’,” Mike Sowinski, April 27, 2014