Divorce is difficult for any family to go through. Many times, spouses put off divorce proceedings in the hope of saving their marriage or for the sake of the children, even when they know they can’t put aside their differences for the sake of preserving their union. Divorce is a challenging decision that should be made with the advice of counsel. Business owners who are married must carefully consider how the divorce will impact their business assets in addition to personal property. Much of what you’ve established in your business can be divided between you and your spouse during divorce.
To avoid sacrificing much of what you’ve built in your business in a divorce, consider the following four tips:
1. Don’t Delay Seeking Legal Counsel
Going through a divorce is an emotional and lengthy process. If you feel like your marriage is heading that way, don’t ignore the signs and pretend it’s not happening. Texas is a community property state, meaning that you and your spouse must split all of your business’s assets and debts that were obtained during your marriage once you divorce. That means if your business is growing and you delay divorcing your spouse, the amount that you’ll split will be higher when the divorce goes through. Even if you’re not sure that a divorce lies in your future, it’s a good idea to speak with a licensed Texas family law attorney to find out how to protect your business.
2. Practice Diligent Recordkeeping
The key to productive settlement negotiations when a property is challenged during a divorce is having thorough records that document your business and property transactions. Some small companies and sole proprietorships in Texas don’t hire an accountant to keep track of business dealings and maintain records full time. This is a mistake that can be costly in a divorce proceeding.
Practicing diligent recordkeeping in your business affairs will make negotiations more manageable in the following aspects of divorce:
Valuation of Your Business
If your business is considered community property, then the value of your business will have to be assessed before it may be divided. Without proper records and documentation, this process can be extremely complex and challenging. Your business can be evaluated using several different methods, but all require correct records and accounting. The values are determined based on various factors in addition to the funds in your business bank account. Examples of assets and debts that are calculated when determining the value of your business include:
- Outstanding invoices
- Upcoming contracts
- Value of equipment & assets
- Repeated charges
Anything that’s used as a tool in your business or trade is a part of the valuation. As a business owner, whenever you purchase tools, equipment, and assets for your business, those investments should be accounted for in your financial records.
Determining Income from Business
If your divorce requires child support payments, you must be able to prove how much income you generate from your business each month. Many business owners pay for meals and personal monthly expenses on company credit. When determining how much money you make each month, however, these business-paid personal expenses are added to your total monthly amount, categorized as “deemed income.”
The simplest way to determine your monthly income is to pay yourself a monthly or bi-weekly salary that’s documented each month. If you pay yourself through cash and bank account transfers sporadically each month, determining your average monthly income becomes much more involved.
3. Keep Business & Personal Expenses Separate
It’s natural for business owners in Texas to use company funds to pay for costs used in their business and personal life – like cell phones, vehicles, clothes, and mortgages. While all of these expenses can certainly be necessary for running the business, when they’re used for personal reasons, evaluating your business and personal assets becomes hazier. When child or spousal support payments are involved during your divorce, be sure that your business account is separate from your personal accounts to make the calculation process as fair and straightforward as possible.
4. Consider a Post-Marital Agreement
A premarital agreement can support an expeditious determination during any property disputes as a divorce is in process. If you don’t have a premarital agreement with your spouse, consider a post-marital agreement when starting a business to designate how community-property business assets would be divided if a divorce were to happen in the future. Planning for a divorce is the last thing spouses want to think about when they’re happy in their marriage, but having this agreement in place saves a lot of heartaches later down the road should the state of your union take a wrong turn. If this is an option for you, consult with a trusted family attorney to discuss your options.
Hire Trusted Divorce Lawyers in Houston
Going through a divorce is never easy, and for a business owner in Texas, it can be even more difficult. Financial concerns and calculations for support are more complex, and having trusted legal counsel is critical to protect the business that you’ve worked hard to build. Hiring a trusted Texas family law attorney, like the team at Stepp & Sullivan, PC, can help safeguard your business and ensure that all aspects of it are successfully handled.
With more than 70 years of combined experience, the Stepp & Sullivan, PC family law firm will handle the details of your divorce so you can focus on what matters most – your family and your business. To speak with one of our expert family law attorneys, call us at (713) 336-7200 or complete an online contact form to schedule your free consultation today.