W. Tyler Moore, PC

What happens to a business when its owners divorce?


The people of Texas have a great entrepreneurial spirit, and many Houston residents are small business owners. Having built a business from the ground up is a satisfying endeavor that can take many years. As a person's business grows, so may their personal life. They may marry and have children all while growing their business. However, they may also experience a divorce. Any of these major life events can have a significant impact on one's business, especially if they shared the business with their spouse.

Sometimes, a young couple will start a business with only a few pennies to their name. In the beginning, their business might not have had much value. However, as time goes by, a business can become profitable, and it is not unknown for a couple's business to eventually become their largest asset. Given the nature of business ownership, should the couple divorce, it is often the case that it is financially impossible for one party to buy out the other. There are some options, however.

One thing a small business owner can do even before walking down the aisle is execute a prenuptial agreement. This type of agreement can lay out who gets the business should the marriage fail. In fact, if done right, a prenup can take precedence over property division laws even in community property states such as Texas.

Another option is a buy-sell agreement. This is a contract that lays out what will happen if one business owner passes away or in another way (such as through divorce) leaves the business. In a buy-sell agreement, a person's shares in the business are put up for sale back to the company or other business owners.

And, of course, even after a divorce, spouses can agree to continue on business operations as they had while they were married. Of course, keeping on as co-owners will only work if the parties are able to set their emotions aside and work for the greater good of the business. And, even if the spouses choose this option, they should still execute a shareholder agreement that allows them to buy the other out for a certain price that has already been agreed upon.

In the end, through careful preparation a person's business can weather many of life's events, including divorce. Business owners in Texas who are going through a divorce and are concerned about how it will affect their business may want to discuss the matter with an attorney.

Source: MarketWatch, "How to protect your family business during a divorce," Daniel Thompson, Feb. 10, 2017

No Comments

Leave a comment
Comment Information
Email Us For A Response

Contact

Start With A Case Evaluation

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Hear From Our Clients

"Grimm Collections utilized Mr. W. Tyler Moore for a very complicated matter of litigation regarding non-payment of freight invoices to one of our clients local to the Houston area. I’ve worked with many attorneys throughout the United States on many litigation matters and the biggest deficiencies are lack of industry knowledge and poor communication/follow up.." - D.M.

Read More
  • Avvo - Rate your Lawyer. Get Free Legal Advice.
  • Avvo Clients' Choice 2012 Lawsuits & Disputes
  • Avvo Rating 10.0 Superb Top Attorney Lawsuits & Disputes
  • Avvo Top contributor 2013 Lawsuits & Disputes
  • AV Preeminent Martindale-Hubbell Lawyer Ratings
  • H Texas Houston's Top Lawyers 2014
  • Lead Counsel Rated Attorney
  • Nation's Premier | NAFLA | Top Ten Ranking 2014
  • Board Certified Texas Board Of Legal Specialization Civil Trial Law Family Law