Many Texas divorces include restaurants, professional offices, and small service providers, like beauty shops. Roughly three million American businesses fit into this category. Even if one spouse was completely responsible for operational tasks, these businesses are normally community property which is subject to a just and right division. Therefore, a family or other business greatly complicates a marriage dissolution matter in Texas.
If your divorce includes a family business, it is beneficial to speak to an experienced Texas business division attorney to learn about your options. That’s because, in most cases, business divisions involve both emotional and financial issues. The appropriate approach must account for both. Unlike custody and support provisions, property divisions are usually not subject to modification. So, it’s very important to get things right the first time.
Assigning a value to a business is usually the first step toward dividing it. Essentially, attorneys must fairly determine how much someone would pay for a certain business. Several recognized models are available since there are several types of businesses. Some examples include:
- Business Assets: Of the aforementioned kinds of businesses, restaurants usually best follow the asset model. These businesses usually have a significant number of kitchen supplies and other durable goods. Furthermore, there’s a good chance a new owner would change the restaurant’s style. So, the other methods could be misleading. Particularly if the small service business owns the space outright or has a very favorable lease, property value could be the key to determining business value. As outlined below, there’s often a significant difference between the property value and the market value. But, property value is often a good start.
- Income Modeling: Professional offices, like insurance agencies, often have few assets and little property value. However, they usually generate significant cash. Usually, this model only works for non-degreed professionals. Occasionally, it works for degreed professionals as well if, for example, another doctor is poised to take over a medical practice.
- Market Approach: If a company is large enough and has competitors in an industry, then the business may be valued using a comparable market appraoch.
Usually, attorneys partner with real estate or other professionals in these situations. These professionals account for subjective factors, such as buyer demand, available inventory, and seller motivations.
The black-letter property ownership rule in Texas is quite straightforward. Property acquired before the marriage, though inheritance, or by gift is separate property that is not subject to division. Everything else is community property and subject to division.
As mentioned, Texas is a community property state. Technically, the community property law is only a presumption. However, this presumption is extremely strong in Texas. Judges must divide community property in a just and right division, and consider the following factors:
- Future Earning Prospects: Typically, young, healthy, and/or well-educated people can earn more money than old, sick, and/or less-educated people. Future business prospects come into play as well.
- Custody of Minor Children: If one spouse surrendered career advancement to serve as a caregiver for minor children, this spouse might be entitled to a disproportionate share. That’s especially true if the spouse stays in this capacity after the divorce.
- Fault in the Breakup of the Marriage: Texas is one of the only states where adultery or other fault is directly relevant in a property division. These divisions are usually quite acrimonious since there are usually two sides to the story.
Additionally, the judge may consider the separate property award and any other factors deemed relevant. Typically, the challenging spouse must prove, by a preponderance of the evidence, that a disproportionate community property award is necessary for a just and right division of the marital estate.
Work with a Dedicated Business Division Attorney
Business divisions during divorce are often complex affairs. For a confidential consultation with an experienced business division attorney in Dallas, contact Orsinger, Nelson, Downing & Anderson, LLP by calling (214) 273-2400. Our law firm has more Super Lawyers than any other legal organization in Texas.