Are you married to a man or a woman who has started a small business? If so, then you know the degree to which they have been committed to starting something and then doing what it takes to ensure the success of this entity. For better or worse, your life has been shaped by the successes and shortcomings of the business and your spouse as an entrepreneur. With that said, whether or not you are involved in the business’s day-to-day operations could go a long way towards determining your outlook on it now and in the future.
When I think about clients and opposing parties who have operated small businesses, I generally feel that these folks are highly driven and motivated. 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 typically at a premium with an entrepreneur
all other things being equal, an entrepreneur frequently runs into issues associated with time. As we all know, time is a finite resource, and we do not have an unlimited amount of it as a result. All of us scramble throughout the day to save as much time as possible to spend on the most important matters to us. We can all look back in our lives and wish we had spent more time doing certain activities and less time doing others. When we tell others that we’re busy, we’re essentially saying that we’re running out of time in the day to complete the task that we need in want to.
People don’t tell you about divorce because when you get a divorce, that does not mean that the rest of your life comes to a standstill. Rather, all of the other issues in your life: your children, your health, your life in general, your hobbies, and your business will still require a certain percentage of your time. As such, you should be prepared for your spouse to argue that their time is at a premium and that they cannot participate in negotiations on the divorce due to issues with their small business. Depending on your role in the business, you may agree.
This does not mean that you can’t negotiate with a small business person in the divorce. Rather, you need to take advantage of the opportunities to exchange settlement terms and work with one another to build upon prior negotiation sessions. If you are intentional with how you negotiate and are goal-oriented in everything, you can use the time you are allotted with your spouse in negotiation. If nothing else, he will have mediation sessions available to you where your spouse is essentially focused solely on your efforts to end your divorce.
What is your role in operating a small business?
So, we’ve already established that your spouse is an entrepreneur. They have started a small business of some kind. Regardless of the kind of business or how it’s been operated to this point, you should also consider what your role in the business has been. Do you play an integral role in its day-to-day operations? That may mean that you are a person who delivers the product or service daily. Are you the head of Baker at the bakery? Are you the head landscaper at the landscaping business?
On the other hand, you may not perform an actual service for the business or create the product. Still, you may be a bookkeeper, office manager, in-house attorney, or fulfill another noteworthy role for the business. Either way, you need to consider your specific role in the business and how essential you are to its day-to-day operations. If you perform some role for the business but understand that you can be replaced, then this may influence how you negotiate regarding the business in your divorce.
On the other hand, you may be an essential component to the business’s daily operations such that you stepping outside the business would set your company back quite a bit. You need to manage your way through this issue to determine how strong of a need it is for you to play a day-to-day role in the business and its operations.
The desire of a person to remain in their business after divorce due to it being their lifeblood playing a central role in the business will be different from if you merely worked a job within that business. If you’re a bookkeeper for your small business in which your spouse runs the day-to-day operations, then you could likely find work elsewhere. That doesn’t mean that you have to punt any financial investment that you have made into the business, but it does mean that you don’t need to view the business as a life or death proposition.
Rather, you should view the small business as rationally as possible. Do not let your emotion or history with the business caused you to make a mistake in negotiation. If you are better off outside of the business and can succeed financially otherwise without being a part of it, then you may be better suited to negotiate for it in this way. Whatever your circumstances are, take an objective and rational approach to negotiations over the small business. While it may be the most important issue in your divorce case, it certainly will not be the only issue you should focus on.
You may be an entrepreneur yourself. You and your spouse may have created the small business together and run it as husband and wife. Now that you are getting a divorce, you all need to come to terms with an unknown future regarding how the business will be run moving forward. Will you continue to operate the business as normal even though you are divorced? Will one of you exit the business and allow the other one to run the day-to-day operations? These are the sort of questions that you need to be asking yourself before beginning your divorce where a small business is at issue.
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.
Is post-divorce spousal support a realistic option for you?
The question that you need to be asking yourself at this stage of your case is whether you will need post-divorce spousal support. For many years, post-divorce spousal support wasn’t an option in Texas. In recent years it has become somewhat easier for you to obtain this type of economic assistance after your divorce, but the requirements are still pretty stringent.
For one, you and your spouse will have needed to be married for at least 10 years for you to be eligible. Another issue to be concerned with is your financial situation and that of your spouse after the divorce. It would help if you showed that you could not meet your basic financial needs with separate property and your immediate income. Many people believe that they will have trouble after divorce when it comes to paying their bills. It is a different subject altogether whether or not they will be able to obtain post-divorce spousal support.
If you and your spouse agree to mediation for post-divorce spousal support payments, then these payments are called contractual alimony. Contractual alimony has much more to do with contract law than it does family law. For instance, in the future, if your spouse does not make the agreed-upon payments have support, then the terms of your contractual alimony can only be enforced up to the number of dollars that a judge could have ordered him to pay you. Any amount over and above this amount cannot be enforced upon.
Next, if you were to go to a divorce trial and have a judge order post-divorce spousal support payments, then these payments are known as spousal maintenance, typically, you and your spouse must have been married for at least 10 years before the divorce, and your spouse must have a proven ability to make payments of support in their budget. Typically speaking, 20% of your spouse’s gross monthly income may be paid to you in spousal maintenance. In most cases, spousal maintenance may not be awarded for more than 10 years after your divorce. Marriages that have lasted for 30 or more years at the time of divorce are typically eligible for spousal maintenance payments of 10 years.
In the future, your spouse can attempt to end their obligation to pay spousal maintenance by showing that they have a decreased ability to make those payments due to financial concerns or that you have begun to cohabitate with the person with whom you are in a romantic relationship with. Furthermore, if you were to remarry, then you’re ex-spouses obligation to pay spousal maintenance ends no matter your new spouse’s ability to provide for you from a financial standpoint.
Hopefully, these additional bits of information on post-divorce spousal support give you a reason to consider moving forward with the divorce if that is in your best interest. Remaining in a relationship for financial considerations may temporarily benefit you, but it stands to harm you on many levels in the long run. Most post-divorce spousal support is not a sure thing in Texas; it is certainly an option depending on the circumstances of your case and the length of your marriage.
How to approach the issue of dividing a business in a Texas divorce
First, I would take some time to interview experienced divorce attorneys who have handled divorce cases involving businesses before. Many lawyers out there will tell you that they are capable of handling your divorce case. It is an entirely different matter altogether for that attorney to have experience handling divorce cases. It would be best not to rely upon an attorney who has no experience handling divorces involving small businesses. What your attorney does not know could end up harming you in the long run.
After you have interviewed multiple divorce attorneys and selected an attorney with experience in matters related to your case, then you can big into organizing your case. It would help if you began working with an attorney to hire someone who could value and appraise the small business. In your divorce, I did the business will be valued and then sold to a third party, you will remain in the business as an operator without your spouse, or your spouse will fulfill that role without you. It is very uncommon for two unmarried, divorced persons to remain in the same roles in a business after a divorce.
It would help if you worked with your attorney to learn how businesses are valued in a divorce and how your business may need to be divided up. For instance, if your spouse will pay you your Community property share of the business, you should figure out how they will do so. Is there available cash on hand in the community estate for you to be paid your fair share? Or, will you need to work out an agreement where your spouse pays you have shared the business over time? Depending on the circumstances of your case, you may need to consider either option.
Next, you should begin to consider what your life is going to look like after your divorce. Where do you want to live? What kind of work do you want to do? If you have played a role in the operation of the business, is that something you want to continue doing after you’re divorced? These are real questions for you to ask and ones that you may never have had the opportunity to deal with until now. If you can answer these questions honestly, you will be at a major advantage when it comes to working together with your spouse to value and divide up the business in your divorce.
Questions about today’s blog post? Contact the Law Office of Bryan Fagan
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