When love and business intertwine, separating them can be complex. This blog explores the distinct hurdles and strategies for individuals divorcing an entrepreneur. Learn how to protect your interests, understand business valuations, and manage emotional and financial intricacies in this special scenario.
Divorcing a Small Business Owner: Navigating the Unique Challenges
Are you married to someone who started a small business? You likely witness their commitment to launching and sustaining the business. The business’s successes and shortcomings, along with your spouse’s entrepreneurial journey, have significantly shaped your life. Your involvement, or lack thereof, in the daily operations of the business greatly influences your current and future perspective on it.
Reflecting on my experiences with clients and opposing parties running small businesses, I generally perceive them as highly driven and motivated individuals. It is difficult to run a successful small business without being a detail-oriented and optimistic person. Entrepreneurs frequently are great salespeople and have a mindset that they can make anything work if given enough time or money. This is an attitude that can pay dividends from the real world; in the world of divorce, it can cause some problems and difficulties.
Time is a precious commodity, especially when dealing with entrepreneurs. Entrepreneurs often grapple with time constraints due to their demanding schedules. This constant battle against the clock is not just about business commitments; it’s a balancing act involving personal life, family, and other responsibilities.
The Undiminished Pace of Life During Divorce
A common misconception about divorce is that it pauses other life aspects. On the contrary, life’s demands – caring for children, maintaining health, pursuing hobbies, and managing businesses – persist. In divorces involving small business owners, a frequent argument is the scarcity of time to engage in lengthy negotiations due to business obligations.
Despite these challenges, it’s possible and necessary to conduct effective negotiations. The key lies in seizing opportunities for constructive dialogue and building on previous discussions. Being strategic and goal-oriented in negotiation can maximize the limited time available.
Leveraging mediation sessions is crucial. These are moments when both parties, including the busy entrepreneur, are focused solely on resolving the divorce. By using these sessions wisely, both parties can work towards a fair and efficient resolution, keeping in mind the unique time constraints faced by entrepreneurs.
It’s crucial to reflect on your role in the small business. Are you a key player in daily operations, like the head baker in a bakery or the lead landscaper in a landscaping firm? Or do you have a supporting role, such as bookkeeping, office management, or legal services? Understanding your involvement is vital for navigating the divorce negotiations.
Determining Your Replaceability and Essentiality
Consider how integral you are to the business. If you’re replaceable, this might influence your approach to negotiating business-related aspects of the divorce. Conversely, if your departure would significantly impact the business, it’s important to recognize your essentiality in these negotiations.
Reflect on whether remaining in the business post-divorce is crucial for you. If your role is more of a job than a passion, like being a bookkeeper in a business primarily run by your spouse, you might find similar opportunities elsewhere. This realization can shape your strategy in financial negotiations, especially regarding your investment in the business.
Try to view the business dispassionately. Emotions and history with the business should not cloud your judgment. If you’re better off financially outside the business, this perspective should guide your negotiation strategy. Remember, the business might be a major aspect of your divorce, but it’s not the only factor to consider.
Addressing Co-Entrepreneurship in Divorce
If you and your spouse co-founded and ran the business together, the divorce brings unique challenges. You need to contemplate the future of the business: Will you both continue to run it post-divorce, or will one of you step back? These considerations are critical as you enter divorce proceedings involving a shared small business.
What Role Do You Want the Small Business to Play in Your Life After the Divorce?
Determining your current role in the small business will go a long way towards helping you answer the question of what role you want the business to play in your life after the divorce is over. Although it may not seem like it, your divorce will come to an end at some point. When that end comes, you will need to pay your bills, save money for retirement, pay off debts, and generally find a purpose for yourself from a work standpoint. Having a steady job can go a long way towards helping you answer all these questions. The question you need to ask yourself is whether your small business will fulfill that role in your life.
Many people delay getting a divorce because of economic considerations. For example, you may have stayed in your marriage longer than you otherwise would have due to concerns over your economic outlook after the divorce. If you are reliant upon your spouse for income, then you may stay in your marriage longer because of concerns over going out into the workforce and finding a job on your own.
This concern may be exacerbated if you own a small business with your spouse. Not only is your economic well-being tied to your spells, but it is tied to your spouse in a way that is even more centrally located to your divorce. Suppose you have concerns about how you will thrive from a financial standpoint after your divorce due to concerns over losing your small business; they miss an issue that you should discuss with your attorney early and often in your case. There are ways to help ensure, but you can get back on your feet financially after a divorce, even if it means losing employment associated with the family business.
Understanding the Eligibility for Spousal Support in Texas
In recent years, obtaining post-divorce spousal support in Texas has become more feasible, yet the criteria remain stringent. Key factors include the duration of your marriage, which must be at least 10 years, and your financial situation post-divorce. Demonstrating an inability to meet basic financial needs with your income and separate property is essential.
If both parties agree to mediation, the agreed-upon support is termed ‘contractual alimony’. This primarily falls under contract law. If your spouse fails to make the agreed payments, the law limits enforcement to the maximum amount a judge could have ordered.
Conversely, courts refer to post-divorce ordered support as ‘spousal maintenance. Eligibility typically requires a marriage of at least 10 years, and the paying spouse must have the financial capacity for support. Generally, you could receive up to 20% of your spouse’s gross monthly income, with a duration usually not exceeding 10 years. For marriages lasting 30 years or more, the duration of spousal maintenance could be up to 10 years.
Circumstances Affecting Spousal Support Continuation
Your spouse can seek to terminate their obligation to pay spousal maintenance under certain conditions, such as a significant financial hardship or if you start cohabitating with a romantic partner. Additionally, remarrying terminates your right to receive spousal maintenance, regardless of your new spouse’s financial capacity.
While Texas does not guarantee spousal support, it remains a viable option depending on the length and circumstances of your marriage. However, making a decision to remain in a marriage solely for financial benefits can harm you in the long term. When considering divorce, it’s important to consider all factors, including the potential for spousal support.
Strategies for Dividing a Business in a Texas Divorce
Selecting the Right Divorce Attorney
Start by thoroughly researching and interviewing divorce attorneys with experience in cases involving businesses. The expertise of your attorney in handling divorces with business assets is crucial. An attorney lacking this specific experience could potentially be detrimental to your case.
Valuation and Appraisal of the Business
Once you’ve chosen an attorney with relevant experience, the next step is to work on valuing and appraising the small business. This process is fundamental in deciding whether the business will be sold, if one spouse will continue to operate the business independently, or if other arrangements will be made. It’s rare for divorced individuals to maintain the same roles in a business post-divorce.
Understanding Business Division in Divorce
Learn about the processes and considerations in business valuation during divorce. If your spouse is buying out your share, consider the means of payment. Will it be a lump sum from available assets, or will there be a structured payment plan over time? Both options have different implications and should be carefully evaluated.
Planning Your Post-Divorce Life
Reflect on your future after the divorce. Consider where you want to live, the type of work you wish to pursue, and whether you want to continue being involved in the business. Answering these questions will give you a clearer perspective, aiding in effective negotiations and decisions about dividing the business during the divorce proceedings.
Questions about today’s blog post? Contact the Law Office of Bryan Fagan
If you have any questions about the material contained in today’s blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultation six days a week in person, over the phone, and via video. These consultations can go a long way towards helping you learn more about the world of Texas family law as well as about how your family circumstances may be impacted by the filing of a divorce or child custody case.
We thank you for your interest in our law office, and we hope that you will join us again tomorrow as we continue to share unique and relevant information about the world of Texas family law. Our attorneys and staff take a great deal of pride in serving our community and look forward to the opportunity of serving you and your family in the future.
Bryan Fagan, a native of Atascocita, Texas, is a dedicated family law attorney inspired by John Grisham’s “The Pelican Brief.” He is the first lawyer in his family, which includes two adopted brothers. Bryan’s commitment to family is personal and professional; he cared for his grandmother with Alzheimer’s while completing his degree and attended the South Texas College of Law at night.
Married with three children, Bryan’s personal experiences enrich his understanding of family dynamics, which is central to his legal practice. He specializes in family law, offering innovative and efficient legal services. A certified member of the College of the State Bar of Texas, Bryan is part of an elite group of legal professionals committed to ongoing education and high-level expertise.
His legal practice covers divorce, custody disputes, property disputes, adoption, paternity, and mediation. Bryan is also experienced in drafting marital property agreements. He leads a team dedicated to complex family law cases and protecting families from false CPS allegations.
Based in Houston, Bryan is active in the Houston Family Law Sector of the Houston Bar Association and various family law groups in Texas. His deep understanding of family values and his professional dedication make him a compassionate advocate for families navigating Texas family law.
