Divorce as a Business Owner

Owning and operating a small business is one of life’s greatest opportunities and challenges. It is an opportunity to set out on your own to create something you are passionate about. There are many financial incentives for business ownership. The challenges that come about because of small business ownership can be substantial. However, your desire to create a legacy for yourself and your family can drive you towards achieving favorable outcomes for your family. Divorce as a business owner is another layer to an already complex process.

A divorce has the potential to upend the goals you have set for yourself. Many families experience hardship because of the divorce. In your worst case, there are also opportunities and challenges to meet head-on. Today’s blog post from the Law Office of Bryan Fagan focuses on divorce as a business owner. There are several factors and circumstances to keep your eye on in this type of divorce. Today’s blog will help introduce those topics and provide you with a framework for achieving success in your divorce.

Any questions you have about the material contained in today’s blog post can be addressed to the attorneys with the Law Office of Bryan Fagan. Our attorneys offer free-of-charge consultations, or you can ask questions and receive answers tailor-made to your specific circumstances. With that said, here are some of the most important considerations for you to take into your divorce as a business owner.

What to think about when contemplating divorce

Simply thinking about a divorce is a major step to take. For many people, divorce is inconceivable as a next step. It is only when the divorce is thrust upon them that they even think about the subject. On the other hand, you may be forced by the actions of your spouse to seriously consider getting divorced. In that case, there is an understandable period of unease about the process. Even if you think that a divorce is necessary it is rarely an exciting event in the life of a family. 

As you begin to think about divorce there are a few thoughts that ought to run through your mind. First, is a divorce the best thing for you and your children? Life is all about options. The more options you have the better your life tends to be. When we corner ourselves (or when life corners us) and we have no place to go that is when bad decisions can be made. Considering something like a divorce to be the “lesser of two evils” is OK when there are only two options. 

Rather, begin to think critically about what options there are for you and your spouse currently. Have you attempted counseling? Before that, have you attempted to have a honest discussion with your spouse about the issues in your marriage. You may be surprised to learn that many people head into a divorce with one spouse not even knowing there was a problem. Don’t let this be your situation. Rather, talk to your spouse about your issues. That way you can have clarity of mind that each option was considered in your small business owner divorce.

Preparing your business for a divorce

One of the unique aspects of a business owner’s divorce is that you must consider the viability of your business. Take stock of your life and your business and you prepare for a divorce. If nothing else, the divorce provides you with an opportunity to consider all areas of your life. A divorce is a major change. Whether any other areas of your life need to be improved upon is up to you. However, it pays to look at these areas in consideration of possible change. 

Every business owner is aware of the statistics surrounding small business ownership. Most small businesses fail. This is not to throw a bucket of cold water on your dreams. On the contrary, it is a commendation for those of you who operate small businesses which are profitable. Many of you started a business not to make money but to enjoy a better home/work balance. Hopefully your small business has afforded you that opportunity. 

A divorce for a small business owner means look at your circumstances and taking inventory. Inventory is a business sense means understanding what you have in stock. As far as your life is concerned the business is one more asset to consider. What you may find is that the business is actually not an asset. If your business is closer to a burden than a blessing it may be time to think about going in another direction.

Talk to an attorney with the Law Office of Bryan Fagan about where you are and where you are going with your business. Our attorneys are not business consultants but we are people who have an expansive knowledge what families go through in divorce. 

What are your goals for the business in your divorce?

It is not that your business should be at the top of your priority list in this divorce. It may be that the business is your number one priority in your divorce case. My point is that your business needs to be evaluated as a part of your life. Where does the business fit into your life after the divorce? For some people, even a successful small business may not be a viable part of your life-plan after your divorce comes to an end. 

Your life may change substantially after the divorce. Consider the following example. You are a father of two children who are school aged. You love your kids but are also a small business owner. The business pre-dated your children and your plan was always to take a step back in the business once they were born. However, that is not how things turned out. The business is more successful than ever but you rind yourself spending more time at the office than ever before. 

Now your wife has filed for divorce. Your desire is to have your cake and eat it, too. Meaning- keep the pedal to the metal on your business but also try and spend as much time possible with your children. A realistic look at this situation reveals that this is not an easy balancing act. For one- you have tried to go this route before. The business won out over the kids. Secondly- you are involved in a divorce, now. How can you balance child raising and business building? Here is one possible way. 

Balancing responsibilities with your business and at home

What can you do as a father who wants to maximize his time at home and provide for his family? It may take some time to balance the two. As a parent it is a good idea for you to put your children first. This is not a judgment on your life to this point or even on your parenting preferences. It is a statement that parents such as yourself need to think critically about your goals for the divorce. Where do you want to be with your business and with your life? Which area of your life is going to receive the focus of your hard work? 

Deciding to operate your business after the divorce is a fine decision. A small business provides you benefits as far as time and money are concerned. You do need to consider how the divorce will impact your business. Deciding on what role to play inside your business will effectively determine what your parenting role will be. As much as you may not like to think about it, parenting decisions in a divorce hinge on two issues: your history as a parent and your available time. 

If asked to, a judge will need to go back in time and consider what your history as a parent had been. Wanting to be the primary conservator of your child is a normal position to take. However, if you have never acted as the primary caretaker for your child it will be difficult to win this designation in a divorce. Likewise, if you want to ask for primary conservatorship now that is an admirable goal. Does your work schedule allow for that kind of request?

How is marital property handled in a divorce?

In a Texas divorce there are, broadly speaking, two different kinds of property. The first is community property. This is property that was acquired during the course of your marriage- with some exceptions. The other type of property is separate property. Separate property is property acquired by you or your spouse prior to your marriage. If you took a piece of notebook paper and drew two lines going from top to bottom which separated the page into three columns- that is a great way to consider the marital and separate estates in a divorce.

You and your spouse have a duty to figure out how to classify and then divide your property in a divorce. How you divide the property is incumbent upon first classifying the property. Is the property separately owned or community owned? If you two can determine how to classify the property then dividing it becomes more straightforward. Disagreements on how to classify the property requires more effort. Consider talking to an experienced family law attorney to help you in this regard.

When you need to prepare a case for dividing community property, please reach out to the Law Office of Bryan Fagan. Our attorneys know how difficult it is to present evidence to a judge. Simply having relevant evidence admitted into the record is a challenge. Our attorneys know how to introduce, offer and have admitted evidence you need in a divorce. Instead of worrying about whether you will receive a fair shake in the divorce, why not do something about it? Reach out to our office today for a free of charge consultation. 

Is your small business a community or separate property asset?

Now that we have covered the basics of marital property division let’s discuss how this subject impacts your small business. When your business was started will inform some of this discussion. That your business was created before your marriage likely means that it is your separate property. However, there are additional considerations which we must pay attention to. For instance, the money used to fund the business during your marriage is critical to determining any need for reimbursement. 

Reimbursement is when community property is used to benefit the separate property estate of you or your spouse. In this case, income earned during the course of your marriage is community property. To recap: we have a separate property business and community income earned from that business. Even though community property division in Texas comes off as straightforward it rarely is. Instead, the subject is full of intricacies like this. 

While the business itself may not be divisible the income earned from the business is. Additionally, your spouse may be able to argue that community property was used to benefit your business. The more you own, in other words, the more complex the discussion becomes. Having an experienced family law attorney makes a great deal of sense. When you must unpack a range of complicated subjects you do not want to lose track of what you are doing. 

What happens when your business is divisible as an asset?

In other words: how do you handle the subject of your business when it is community property? Say that you started a landscaping business during your marriage. It started off slowly but now you employ a number of crews that operate in your town. In a big city like Houston or Austin, there are an uncountable number of lawn maintenance crews operating in the area. However, you live in a small town just north of The Woodlands, TX. As a result, your name means something in lawn maintenance. 

That business you operate is at the center of your divorce. You need to make a decision about how to treat the business in your divorce. There are a few different directions you can go in. Which is a good thing: even if you do not like all the options, it is better to have a few choices to look through. Generally speaking, options are a good thing. It’s when we run out of options that we can begin to make bad decisions. This is especially true in a divorce as a business owner.

Here, you can start to think about what you would like to do with your business in the divorce. Remember that since the business is part of the community estate it is not only your decision to make. Rather, you and your spouse play a role in determining how the business is divided (if at all). In the event that the two of you are unable to come to a conclusion on this subject then a judge would be called in to decide. As such, even spouses who are in disagreement tend to make decisions like this better as a team. 

The options to consider when handling your business in a divorce

You need to ascertain the value of your business. Hiring an experienced business appraiser is step one of this process. Working with an experienced attorney with the Law Office of Bryan Fagan allows you to walk into a world where you can learn about the different options for hiring an appraiser. We work with many clients whose businesses need to be valued. It is not a given that you will need to sell or divide your business. However, the value of the business is important. You can maintain your business as is but the value will help you to determine how to divide your community estate. 

Factors involved with appraising your business include inventory, cash reserves, book of clients, accounts receivable, debt and the value of your name in the community. In this example, your landscaping business is well known. You, too, are well known as a fine member of the community. These are all factors which add to the value of your business. Whatever the value ends up being is consider amongst your other community property and debt.

Suppose the value of your business is $650,000. If the business is community property that means that the business is just as much your spouse’s as it is yours. Even if she does not work in the business. That means you and your spouse need to get creative if you want her to benefit financially from the business but don’t want her involved in the daily running of the landscaping company. Dividing other assets can help you equal the your spouse’s community property interest in the property.

Final thoughts on divorcing as a business owner

Any questions you have about today’s blog post can be addressed to the attorneys with the Law Office of Bryan Fagan. We thank you for choosing to spend part of your day here on our blog. Involved in a business owner divorce? Reach out today us today.

Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan

The attorneys with the Law Office of Bryan Fagan offer free of charge consultations six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about the world of Texas family law. Before signing a document or negotiating on a subject you do not know well, contact our office. We look forward to the opportunity of serving you during an important part of your life. The Law Office of Bryan Fagan is on your side.