Divorce and the family business
Divorce and the family business interests can become complicated, especially when spouses are both shareholders. In a Texas divorce, the court applies statutory rules regarding the process of determining what property and assets are classified as community or separate property for purposes of distribution in the divorce. See our article and podcast about Community Property for more information.
In the Wichita Falls area there are many small businesses owned by families and it is common for siblings and other family members to own shares. How shares are owned and what rights and duties are attributed to the shareholders may depend on the family business bylaws and other legal documents and operations. A well-written shareholders agreement should address spouses and what may happen in the event of death or divorce.
Does your spouse own equal shares?
If you and your spouse own equal shares in the business and you divorce, there may be unanticipated outcomes. Many of us assume our spouse will not be interested in the shares of a small family business, especially where those shares are not worth as much as cash in hand in lieu of the shares.
The failure in logic may be the assumption the spouse wants out of all aspects of you and your life. A scorned spouse with a legal right to retain their shares in the business can make your life difficult for years to come.
The jilted spouse may feel less awkward about sticking around when it comes time to vote on something like the payment of dividends. Where it had never been a problem before the divorce, your ex may be one of the deciding votes not to pay dividends, for example.
Why buying your spouse’s shares over their value makes sense.
To prevent your former spouse from sitting next to you at the board of directors table, you might want make an attractive offer they cannot refuse. If at first you offer a fair price for their shares and they refuse, increase your offer.
Even if you feel as if you are coming out on the short end of the stick and are overpaying for what you already consider overvalued shares, the peace of mind and future security in the family business can be worth your cost in the divorce.
In divorce cases involving family businesses there are a variety of ways shares are held. How you received your shares has much to do with whether your spouse will have a claim to part of the business.
For information about Texas divorce and family law please call Attorney Richard T. Sutherland in Wichita Falls, Texas by dialing (940) 691-2100.
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Richard T. Sutherland represents people and families in Wichita County, Archer County, Baylor County, Clay County, Foard County, Hardeman County, Jack County, Montague County, Wise County, Young County and Wilbarger Counties in North Texas and has accepted cases in other areas West, North-Central and in South Texas.