Divorce Advice for Business Owners & Professionals
Industry Leading Counsel From Houston Divorce & Business Lawyers
When divorce cases involve ownership of a business or a professional practice,
experienced counsel and representation become vital to navigating
complex issues of property division.
- Proper valuation of your business
- Determining the characterization of the business as separate or community property
- Tailoring legal strategies to the unique issues involved
- Pursuing resolutions that protect your rights and interests
As recognized leaders in both
family law and
business law, our legal team at Hendershot, Cannon & Hisey, P.C. is equipped with
the breadth of knowledge to help clients navigate the challenging issues
inherent to dissolving a marriage when business ownership and professional
practices are involved- whether that involves negotiating an equitable
settlement agreement, or aggressively litigating when necessary.
Discuss your rights to a business or professional practice with an experienced
Houston divorce attorney from our law firm. Call
(713) 909-7323 or
contact us online 24/7 for an initial consultation.
Divorce Advice for Business Owners & Professionals - Resolutions To
Whether you own a business or professional practice, are the spouse of
a business owner or professional, or share ownership of a closely held
business with your spouse, you will need to establish objectives with
reasonable expectations. Although every case is unique and outcomes vary,
there are generally three ways to resolve ownership issues:
Co-ownership – Co-ownership allows both spouses to continue owning a business
together after the divorce, provided they wish to do so and can remain
amicable. Often this will entail a realignment of business responsibilities
that reflect new roles in ownership and operational structure of the business.
Continued co-ownership is often not a reasonable or viable solution for
divorcing partners, especially if they wish to move on and apart.
Sell and divide – Business owners may choose to sell a business and divide the profits,
which they can use to invest in business ventures of their own. This allows
for the severance of financial ties to an ex-spouse, but can be a timely
and cumbersome process.
Buy-outs – One spouse is awarded the business, or professional practice (provided
they are a licensed professional), and the other will be “bought
out” by buying the other spouse’s community property interest,
or negotiating a fair price to be paid by the owner spouse. This can be
achieved through payments of cash or liquid assets, or through offsetting
the selling spouse’s community property interest through other assets,
such as equity in a home, retirement accounts, securities, or structured
Business Valuation and Divorce
When it comes to valuation, each type of business structure offers its
own particular challenges and opportunities in divorce:
Family Businesses – Whether you intend to pursue co-ownership of a family business
after divorce or not, it is important to value your individual interests
so the business can be included in your property settlement.
Valuing a business, in addition to determining community and separate property interests,
is a complex task which can be handled through various methods, including
estimating value by comparing similar businesses (market approach), calculating
past and current profits (income approach), and evaluating assets and
liability (asset approach). Valuing community components in separate property
businesses is also critical to determining each party’s interests
in the business.
Goodwill & Income Projections – Valuation of a business or practice in a divorce can involve intangibles.
Projections of profits or losses are not the sole factor, given the
goodwill (both personal and commercial) that a business may have built up and the potential upside in a given
industry. These intangibles include factors such as recurrent and referral
business, reputation, and legacy, and they can be critical issues when
a professional practice is involved.
Appreciation – When one spouse already owned a business at the time of the marriage,
it can be challenging to determine how much of the appreciation in value
(earned during the course of a marriage) is considered community property
subject to division.
Financing Issues – In some cases, dividing interests in a small business includes
allocation of debts and obligations to repay loans or fulfill other financial
commitments. These commitments may be loans from the Small Business Administration
or other lenders. It may also be a matter of resolving the status of lines
of credit, personal guarantees, or working capital.
Division of the value of a business or professional practice depends on
their size and structure, as well as the unique aspects inherent to their
value and according to what is considered
separate property and community property under Texas law. From simple mom-and pop stores organized to elaborately arranged limited
partnerships and limited liability companies (LLCs), your interests must
be characterized and valued by an independent professional.
Professional Practices: Seeking the Right Solution for Your Situation
During divorce, the professional practice will be subject to division.
Because part ownership cannot be given to a spouse who is not licensed
to practice in that field, issues of division largely depend on how the
practice is structured and the professional spouse’s ownership role.
As with other businesses, there are basic structural differences between
traditional partnerships and entities such as PLLCs, which are now widely
used among professionals.
In many cases, a
spouse’s right to a professional practice is resolved through a buy-out of the non-practicing spouse’s interest
in the value of the practice, which can be complex when elements such
as goodwill are considered. Based on the unique details of your case and
preference of both parties, creative solutions can be reached to ensure
equitable division without harming the practice. This may include, among
other things, using contractual alimony or shares of other community property
to buy out an interest.
Tell us about your case - We'll tell you how we can help!
With the ability to leverage our insight as
business and family law attorneys, we can effectively and creatively address issues
involving valuation, community and separate property, and the most appropriate
methods for equitable distribution, including settlement agreements negotiated
through mediations, or hard-fought resolutions secured through focused
and aggressive litigation. As resolutions secured in these matters leave
the future of businesses, practices, and individuals in balance, there
is no substitute for experienced counsel and preparation.
Speak personally with a member of Hendershot, Cannon & Hisey, P.C. Call
(713) 909-7323 or
complete this form 24/7 for an initial consultation.