Division of Businesses in High Net Worth Divorce

Business owners often take pride in their ability to build and grow thriving enterprises that reflect their vision and hard work, and for many, the substantial value of their businesses reflects their dedication. When business owners decide to end their marriage, though, they are typically tasked with the undertaking of determining whether the business should be divided and if so, what it is worth. The division of businesses in high net worth divorce cases can be one of the most complex aspects of property division. As such, if you are contemplating legally ending your marriage and you or your spouse own a business, it is prudent to confer with an attorney about your rights. At McClure Law Group, our trusted Dallas divorce attorneys understand what it takes to obtain favorable results in divorce actions, and if we represent you, we will fight to help you protect your interests.

Texas is a community property state; as such, it is essential to determine which portions of a business are classified as community property and which are separate. Community property, which includes any property obtained during the marriage with few exceptions, is considered the property of both spouses and is subject to division in a right and just manner in divorce actions.

Separate property, including businesses acquired or started before the marriage, typically remains with the original owner. In contrast, any business-related growth or income that occurs during the marriage may be divided. In other words, if a business was established before the marriage but expanded significantly during it, the appreciation of that business may be considered community property. Additionally, when one spouse contributes personal funds or resources to grow a business, it may create a community interest even in a previously separate asset.

Determining each spouse’s contribution is crucial for ensuring equitable division, especially if the business has grown significantly during the marriage. For instance, a spouse who actively managed a business’s operations or developed its client base may be awarded a larger share of its value. Additionally, indirect contributions, such as a spouse taking on household responsibilities to allow the other to focus on business management, can also be considered in the property division process.

The division process can be further complicated when businesses have outside investors, partnerships, or multiple stakeholders, as these arrangements can impact the business’s community and separate property designations.

Before determining the division of businesses in high net worth divorces, the courts must conduct a careful valuation process. Valuation can be approached in several ways, each tailored to the unique characteristics of the business. An asset-based approach values the business by examining its assets and liabilities, while an income-based approach focuses on projected future earnings, which is especially relevant for businesses with consistent revenue. The market approach, often used for larger companies, compares the business to similar enterprises recently sold in the market. Business valuation experts often play a key role in this process, providing an objective perspective on the business’s worth.

Many business owners are concerned about the long-term impact of divorce on their business, including how future ownership or operations may be affected. In some cases, it may be possible to negotiate an agreement that preserves one spouse’s sole ownership while providing the other with compensation through alternative assets. This type of arrangement allows the business to continue operating without disruption, preserving its value and continuity. When an outright division of the business is not practical, parties can also explore options like buy-sell agreements, whereby one spouse buys out the other’s share of the business to retain full control.

The division of businesses in high net worth divorce cases is a multifaceted process with long-lasting financial implications. If you or your spouse owns a business and you are considering divorce, you should talk to an attorney who understands the complexities involved as soon as possible. The skilled Dallas divorce attorneys of McClure Group are committed to fighting for fair outcomes, and if you engage our services, we will advocate aggressively on your behalf. Our primary office is located in Dallas, and we have a Collin-County office in Plano where we can meet with clients by appointment. We regularly represent people in divorce cases in Dallas, Fort Worth, Rockwall, Frisco, McKinney, Irving, Richardson, and Garland. We also assist people with family law disputes in cities in Dallas, Collin, Denton, Rockwall, Tarrant, and Grayson Counties as well. You can contact us by using our online form or calling 214.692.8200 to arrange a confidential meeting.