Top 5 Things You Need to Know When Dividing a Business During a Divorce. A Dallas Divorce Attorney Explains.

Divorce can be a nerve-racking experience. You probably have lived and raised kids for several years and now you have to part ways. Things can even be worse when it comes to dividing a business. There are many reasons why people decide to go their separate ways, after living together for years. When that time comes, it is important to end the relationship amicably if possible – especially if there are children involved and substantial assets like a business. Hiring an experienced Dallas divorce attorney will help you in dealing with these complex issues.

Top 5 Things You Need to Know When Dividing a Business During a Divorce

Dividing property or business is one of the sensitive areas of a divorce. You should note that your spouse may have a rightful share of the business, regardless of whether she or he contributed to building it or not. 

Below are some of the things you need to know when dividing a business during a divorce: 

  1. Separate and common property 

According to the divorce law, common property must be divided by the spouses in case of a divorce. 

Common property refers to anything the coupe acquired during the marriage. For instance, if a business was started during a marriage, then it will be considered as common property. 

Separate property on the other hand refers to property that each spouse acquired before they entered into a marriage. Separate property can’t be subjected to division during a divorce. This means if you started your business before marrying, your spouse may not have a claim on it. However, if a spouse added value to a business started prior to the marriage then they 

  1. Division of property 

During a divorce, spouses are supposed to share all property they acquired in the marriage. This includes both assets and debts. A business can also be considered common property, as long as it was started during the union. 

According to a Dallas divorce attorney, common property has to be divided equitably between the two partners. Equitable sharing means the property will be divided based on the contribution of each spouse. It will be upon the discretion of a judge to decide what each spouse gets. 

  1. Business valuation 

If it is established that a business is part of the common property, a judge will order an evaluation to be conducted, before dividing it. Some of the things that the valuation will focus on are dentures, assets, financial statements among others. 

There are three models commonly used to determine the value of the business: 

  • Market valuation: the company or business is compared with the value of other similar companies
  • Asset valuation: This is where all liabilities and subtracted from the assets. The remaining assets will be considered the value of the company
  • Valuation based on income: This is probably the most popular approach. Future profits and financial flow of the company are predicted using the existing financial records. 
  1. Protecting business 

Divorce can hurt a business in a big way. There are several things you can do to protect your business or company during a divorce. 

They include the following: 

  • Prenuptial agreements: This is one of the best ways to safeguard your business. Such agreements give regulations on how the parties will conduct themselves in case of a divorce. The documents have to be prepared and signed before the wedding
  • Postnuptial agreement: This is an agreement signed after the wedding showing the ownership interest of the spouses.
  • Don’t allow her or him to participate in the running of your company: This is also another way of protecting your company. The less he or she participates, the lower the chances that he or she will become a shareholder. 
  1. It is important to have a divorce lawyer when dividing a business during a divorce. He or she will guide you and ensure that you get your rightful share. 

If you need more information and advice, you can call our law offices today at any of our convenient locations and get a free consultation.

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