Home » Divorce Lawyer Fort Worth, TX » Why You Need a Family Business Lawyer During Divorce
If you’re contemplating divorce in the Dallas / Fort Worth area and are searching for a family business lawyer near me, it’s important to seek out a law firm with proven experience handling divorces where a family business is involved. At the Sisemore Law Firm in Fort Worth, our family law attorneys regularly deal with divorces involving family businesses and understand the complexities involved with businesses—big and small.
It also doesn’t hurt to consult a divorce attorney who happens to be an entrepreneur. Our firm’s founder, divorce and family business attorney Justin Sisemore has owned multiple businesses in his lifetime—from real estate to a battery business to the Sisemore Law Firm. He is not only passionate about being an entrepreneur, he is keenly aware of the minutiae and dynamics that make a family business tick.
When you combine that passion and insight with the fact that our firm has handled divorce litigation involving family businesses for over 15 years—this legal team has the experience you need to handle a wide variety of business-related issues. Consequently, if you need to find a family business lawyer near me who knows how to deal with businesses in the realm of a divorce, the Sisemore Law Firm is here to help.
To schedule a confidential case review with our law firm, please contact our office by phone at (817) 336-4444 or connect with us online.
The Sisemore Law Firm maintains a very strong business and social network throughout Dallas / Fort Worth. When our firm is handling a divorce involving family businesses, we frequently work with very specific experts who are retained to weigh in on various aspects of a business. For example, we may retain experts in the areas of forensics, asset tracing, business valuation, operations, estate planning, finance and accounting practices, among others.
After 15+ years working on family business divorce cases, we also know which experts rise to the top in their respective areas. Since our firm has worked closely with these experts over the years, we have numerous resources at our fingertips to help guide clients through the various aspects of decision-making involving their businesses, as well as through corporate and transactional litigation when needed.
Our divorce and family business attorneys start by looking at each client’s business from a macro level first. We want to determine what level of acrimony there is in the spouses’ relationship and whether continuing to run the business together would even be an option.
In most divorces involving family businesses, we find that one party is usually much more involved in and knowledgeable about the business than the other. If you don’t have a clear understanding of the business itself—say you’ve had little to no involvement with the business—it’s important to hire a family business lawyer who will take time to show you how to locate any bank accounts and inventory associated with business, as well as how the business finances are handled. Our firm frequently brings in forensic, financial and business experts to take part in these conversations.
Regardless of which side we are representing, we know it’s critical is to peel back the layers of the onion of the business to find out what assets are involved (bank accounts, property, inventory, business income, vehicles, etc.), how the business operates and what roles various employees (including family members) play in the business.
In order to get an accurate picture of the family business, the family business dispute lawyer will utilize different experts to trace, identify and do a valuation of assets inside of the business. The courts can order that these experts be granted access to business accounts (along with other business and financial information) in order to perform their analyses. This process also helps ensure transparency about the workings of the business during divorce negotiations.
When some business owners have marital problems, that tension can spill over into the business. If you bring that tension into the workplace, employees usually catch wind of it immediately. It’s really important—in all aspects of business—to keep your business and your personal life as separate as possible.
You don’t want to allow those feelings or conversations to slip over into your business, just as you wouldn’t want your children to witness them. If you and your spouse are going to war personally, you need to figure out how to keep your marital discord private and away from the employees. Of course, that can prove to be very challenging.
Another scenario we frequently see is where one party has a mindset that the other party is going to get half of the business, so they just shut down business activities. Obviously, if someone does that for four to six months, they could potentially destroy their business. Diminishing the value of a business is more common than you think, and a family business lawyer can help you take actions to prevent that from happening.
We also see people taking on debt and doing other things out of the ordinary in the business, simply because they don’t want the other party to receive the benefits of the business. Or conversely, they don’t want to bear the burden of the debt, so they deplete the cash flow out of the business in a much more expedited manner, leaving the business without the fuel it needs to operate.
Divorce makes people do crazy things, even when the actions they take result in personal and financial harm. If you’re facing divorce and a family business is at stake, contact a family law attorney for family business right away.
We often work with clients where one party plays a small role in the company, say a bookkeeper, while the other party is the operator. In this case, if the bookkeeper wants out of the business (or the operator wants the bookkeeper out of the business), the family-owned business attorney will need to help the client proceed with a valuation of the business and business income.
In addition, a replacement for the bookkeeper will need to be found. An experienced family business attorney will identify the duties the party performed in that position and create a plan to offboard the party when a replacement comes in. Based on the valuation of the business, the parties and their attorneys will then need to find a way to compensate the spouse who is stepping away from the business.
One option would be to offer a security interest in the business itself. For example, if you are receiving a portion of the business via compensation, we can put security interest attached to inventory, specific vehicles, etc. Again, it goes back to categorizing what the assets are in the business and identifying whether the two parties can work together, which can be very challenging for some soon-to-be ex-spouses.
If you need to sell all or a portion of the business as a part of your divorce settlement, your family business attorney can help arrange for a receiver to come in and handle the sale. Receivership can be a very extreme remedy when you’re dealing with a family business because receivers peel off layers of the business and sell them without emotion, for example, selling inventory or trucks.
Other issues come up when going through receivership. Oftentimes, certain parts of the business are attractive and marketable, while other parts are not. And sometimes parties are forced to sell a business in a market that isn’t very favorable. The receivers come in (just like they do with the residences in a divorce), and they force a sale. Depending on the marketplace and other factors, the sale could end up being financially damaging to either party or both.
One of the most common questions our firm receives is, “My spouse started the business before the marriage, but I’ve worked in it and I’ve helped grow it. What do I get?” And the short answer is: Not much. The reason why is that the inception of title for a business is treated the same as any other asset, like a house for example. Meaning, if the inception of title occurred prior to marriage, that asset would be considered separate property and not subject to division as a portion of the community estate.
However, when you start and incorporate the business before the marriage, the other spouse is entitled to the income that the business produced during the marriage. Again, that’s where you need a knowledgeable attorney who knows how to take a deep dive into the operations and financials of the business.
What we frequently see is one spouse (generally, the controlling spouse who started the business) will reinvest business income into the business. They might be paying down debt or investing in things that don’t really have a lot of value. In those cases, the other spouse gets left out high and dry. They don’t have the ability to receive half of the value of the business because it’s separate property, and there’s little if any business income.
A family business lawyer will also look at future income and future performance, which is tied to separate property and community property. It’s a question of vesting. For example, say we sell a widget now when we’re still married but it’s going to be delivered a year from now—which will occur after the divorce—and be paid for when it delivers. In this case, the work has been done, and the money has been earned, it just hasn’t been received yet. That’s a basic example of income vested during marriage.
On the other hand, say I was going to be servicing that widget, and I have a contract in the future to service it. It requires future work or future performance. While I may have secured the income for future work, I haven’t done the work or done enough specific performance to consider that a vesting situation during the marriage. You could make an argument that the work hasn’t been done, and if I die tomorrow when I’m no longer married, I don’t get paid, so that income shouldn’t be considered vested.
A lot of clients feel left in the dark, and they ask us, “How do I get my hands on financial information, so I know what he or she is spending inside of the business?” In these cases, we start by drafting temporary orders that put certain restrictions on the business bank accounts and decision-making, as well as requiring the joint signatures of both spouses and/or a third party, if necessary. After temporary orders, we can also serve the opposing party with discovery to gain access to business records, financials, etc. We will also ask the judge to order that our client (and their financial experts) be given access to the business financials, so transparency can be ensured during the divorce.
We see a lot of inexperienced attorneys make the mistake of trying to force the business owner to press the brakes on everything, where nothing can be done in the business. Businesses have to continue to get fuel to flourish. If the attorney tries to stop cash flow—because they are nervous about how the business will be operated and don’t know how to put preventive measures in place—that attorney and their client may end up diminishing the value of the business (and the estate).
As a family law firm with 15+ years of experience handling family business divorce cases, our attorneys know once we can see the bank accounts, know how much the parties are allowed to spend, review the P&L with an accountant and vaguely understand the operation of the business, we can put pitfalls and corrective measures in place that preserve the integrity and valuation of the asset. If you make the mistake of hiring a nervous, inexperienced attorney, you could really hurt the business and yourself.
At the Sisemore Law Firm, we don’t do estate planning but we will collaborate with a business succession planning lawyer when handling a divorce involving family businesses. Consequently, if you’re going through a divorce and searching for a family business lawyer near me who can connect you with a business succession planning attorney, we can help.
That being said, family law attorneys regularly deal with issues pertaining to estate planning and do address those issues inside of divorce, specifically with regard to family business succession planning. Many couples who own family businesses have adult children they hope will take over their businesses one day. Should a couple decide to divorce, those issues still need to be dealt with.
During divorce cases, we often see parents using the family business as a weapon of manipulation, just like they would use a car or truck to entice family members to take their side in the divorce. For example, a father takes his 30-year-old son aside, who now has a family of his own, and dad says, “Junior, your mother’s trying to take this business from us. I’m going to give you this portion of the business, sign here …” What’s Junior going to do?
We also see people put blinders on when it comes to succession and the family business. When someone puts blinders on, they make mistakes, like signing documents that give an interest in the business and/or set up a trust for a child. In reality, there could be a full scheme going on behind the scenes to terminate the unwitting parent’s financial stake in the family business.
While corporate, transactional and estate planning attorneys typically handle family business succession planning, your family law attorney can help you put a family living trust in place that dictates how the business will be operated in the event of divorce. They can also help make sure the articles of incorporation are set up for amendment, among other things. The big takeaway here is you should never sign off on documents if you don’t understand what those documents purport to do.
A power of attorney agreement (POA) can take many shapes and forms, and we get a variety of questions about them in relation to family businesses. Some basic attributes of a power of attorney for business are similar to a POA agreement an estate planning attorney would draft for an individual.
For example, there are different POA types in Texas, one common POA type being a limited power of attorney, which allows someone to act on your behalf for a specific purpose for a limited period of time. Another common POA in Texas is the general power of attorney, sometimes referred to as a broad power of attorney, which allows a designated person to handle a broad range of actions on your behalf.
People also ask us, “Is a POA a contract?” A power of attorney for a business or an individual is in fact a legal document, which allows an individual to make decisions or take actions for a business or individual based on the directives in the agreement. By the way, if you’re searching what is a power lawyer online (which may be how you found this page), try searching for “power of attorney” “lawyers” or “lawyers for POA for business” if you need an attorney to assist you with a power of attorney contract.
While estate planning attorneys handle the vast majority of POAs, the best divorce lawyers in Fort Worth, Dallas and beyond are also very familiar with the power of attorney for business. So, what is a POA for business and how can they impact a divorce involving a family business?
A power of attorney for business is a legal agreement business owners can put in place that allows certain individuals to have the ability to make business decisions on behalf of a corporation. That being said, we usually find an entity will be set up with articles of incorporation that include those directives. If we’re representing a client who owns a business that doesn’t have articles set up—with bylaws that direct how the business functions and runs—we may ask for temporary orders that include a power of attorney to be able to continue conducting business.
When you’re going through a divorce, and there is a durable power of attorney for business in place, your attorney will need to help you do one of two things. If you don’t want to lose your ability to make decisions for the business, your attorney could ask for a petition for an injunction requesting that changes can’t be made to those documents.
On the flip side, if you are thinking about getting divorced and are also the spouse who started the business, you should speak to an attorney about revoking power of attorney documents that allow your husband or wife to make decisions, like writing checks drawn from the business accounts. When it comes to a power of attorney for business, it’s important to know if your business has one, who it empowers and how that will affect your business in the event of divorce.
Divorces involving family businesses can get complicated, we can provide the legal guidance you need
For more than 15 years, the Sisemore Law Firm has been helping family business owners navigate the many challenges that arise during divorce. If you are contemplating divorce in the Dallas / Fort Worth area and need the guidance of a knowledgeable family law attorney for family business, our experienced legal team is here to help.
Whether you own a small business or multiple businesses intertwined with a high-net-worth estate, we know what it takes to help you achieve the optimal outcome for your simple or complex divorce. If you’re ready to take the next step, contact the Sisemore Law Firm today.
To schedule a confidential consultation with the Sisemore Law Firm, please contact our office by phone at (817) 336-4444 or connect with us online.