A Texas Two-Step: Family Business in a High Asset Divorce

 Posted on April 04, 2016 in Family Businesses

In many situations, a closely-held business is the largest economic asset in a marriage. Moreover, it is often the couple's primary source of income; in fact, in many cases, spouses have put off development in their professional careers to pour their time into the businesses, and reintegrating into the labor force may not be easy. These economic factors sometimes make it difficult to divide these assets in a high asset divorce.

There is an emotional aspect as well, because it is often difficult to disconnect from a business after it has been such a large part of life.

Fortunately, in a number of cases, it is possible to keep a business intact after a high asset divorce. Truth be told, many spouses are better business partners than romantic partners. If they continue to work together, there will inevitably be tension and awkward moments, but these things exist in almost any partnership.

Division

If the business must be divided, there are a number of options available. Selling the business and dividing the profits seems to offer a clean break, but it might take months or longer to find a buyer willing to pay full value and the business is lost forever. Another idea is to arrange for a buy-out, because the matter is disposed of quickly and the business can remain in the family. To bring this about, the parties often arrange an offset; for example, Wife might give up a share of the marital residence in exchange for a controlling interest in the business.

Tracing Assets

In Texas, all business assets are community property if the starting date occurred after the marriage, unless the challenging party has clear and convincing evidence that the property is separate property. Some key considerations include:

• Source of Startup Funds: Many times, funds are commingled from the start; for example, a couple may supplement Wife's inheritance with proceeds from a second mortgage on the marital residence.
• Date of the Marriage: This prong is about the only part of the test which is mostly objective.
• Valuation Date: There is some disagreement as to whether the valuation date is the day of separation, day of divorce, or the day the petition is filed.
• Contribution of Each Spouse: Economic contributions are on a nearly equal playing field with non-economic ones.

To value an asset, most professional appraisers use the market method, which is similar to using "comparables" to value residential real estate. This method considers both tangible and intangible assets.

For prompt assistance in this area, contact an aggressive Leander high asset divorce attorney. Call Powers and Kerr, PLLC at 512.610.6199 today. The sooner you call, the sooner we can begin protecting your legal and financial rights.

Source:

http://www.statutes.legis.state.tx.us/Docs/FA/htm/FA.7.htm