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What are the three most common ways to address a family business during divorce?

On Behalf of | Aug 25, 2022 | blog, Divorce |

Dividing marital assets can be one of the most heated and difficult tasks undertaken during a divorce. Texas is an equitable distribution state. For couples that own a closely held business, this mandate becomes even more complex.

While it may be surprising, especially to someone that owns and runs a company without their spouse’s involvement, almost every family business is community property. After you digest that information, you must decide how to address the division of the business. These are the most common solutions.

1. Buyout your spouse

A buyout is the most common solution. If you have enough cash you can purchase the business outright; otherwise, you can concede interest in other marital assets, like the family home, to create an equitable distribution. A buyout is a desirable solution for the business since it allows you to continue running your company without interference. It also facilitates a clean break between the two of you after the divorce.

2. Sell the business

If neither of you wishes to keep the business, or if there is not enough cash or assets to accommodate an equitable distribution that includes the business, you can sell and split the proceeds. Selling a business can be time-consuming, and could result in prolonging your divorce.

3. Co-ownership

You can choose to jointly own and operate the business with your ex. If your divorce is amicable this might work; however, for most couples, the idea of remaining business partners after the divorce is unappealing.

Each resolution has advantages and disadvantages. Your situation, and your relationship with your spouse, can dictate which route you choose.