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When you know you’re headed for divorce and you own a business, you might have some concerns. Does one spouse get the whole company? Will we go out of business? Let’s discuss five of the most common myths about business owner divorce that our North Texas attorneys have heard over the years.

Myth 1: There Is a “Best Way” to Divide a Family Business

Every divorce is unique; there is no “best way” to do anything. The best way is whatever works best for that specific couple. When it comes to dividing a family business, there are usually three options, and which one is best will depend on your needs and goals:

  • One spouse buys out the other, often by using cash or by giving up other assets from his/her part of the marital estate
  • The spouses agree to sell the whole business and divide the proceeds
  • In rare instances, the former couple may decide to continue co-owning and managing the company after the divorce

Myth 2: The Business Is Separate Property

Often, if one spouse owns the business in their name only, then they mistakenly believe the company can’t be divided in a divorce. In reality, property division in Texas is not governed by whose name is on an asset. Even if you started the company before getting married, any increase in its value that occurred during the marriage will likely be subject to division. 

Myth 3: The Type of Business Entity Does Not Matter

In reality, the structure of your business can make a great deal of impact on the division. A small sole proprietorship will require a different approach than an LLC or corporation. The more complex the company, the more bylaws and other factors play into the process.

Myth 4: Valuing a Business Is Straightforward

Many business owners believe their business’ value is whatever shows up on a financial statement. In truth, there’s much more to the valuation process. Revenue, inventory, equipment and other tangible items are factored in, of course. But intangible assets such as goodwill are harder to value. Moreover, each spouse may hire their own team of experts to value the company, leading to competing valuations that must be reconciled.

Myth 5: A Failing Business Can Be Ignored in Divorce

If a company is operating in the red, it can’t have much value, right? Wrong. Small business owners have great power over the company’s books. What looks like a failing business might be profitable. Or the owner spouse might be siphoning funds out of the company and into a hidden personal account. Every business, profitable or not, must be analyzed during a divorce.

Talk to a North Texas Business Owner Divorce Attorney

If you are headed for divorce and a family business is involved, call the lawyers of Albin Oldner, PLLC. Our lawyers are highly experienced in all aspects of business owner divorce and asset division in Texas. You can schedule a meeting by calling (214) 423-5100 or send us a message to arrange a consultation.

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