So you’ve divorced and your business was awarded to you in the divorce decree. Now what? Many people believe the divorce decree is all that’s needed to handle transfer of ownership. The truth is there is more paperwork needed to transfer ownership properly.
Business in Divorce
Most of the time, a business is treated as an asset and awarded or divided by the court as part of the community estate. The award is typically only effective as to the spouses divorcing. Think of it like your mortgage or car note. When the court awards the house to a spouse, there is still paperwork to prepare (like a deed) to transfer title. Similarly with cars, when the decree awards you a car, you still must transfer title with the state. The same is true with a business. Just like these examples, there is additional paperwork to transfer title and ownership.
What Paperwork Is Needed?
The paperwork varies depending upon the award made by the court and the type of entity. A corporation’s paperwork will be different from a LLC for example. Examples of paperwork needed can include such things as purchase and sale agreements, minutes, resignations, unanimous consents, etc.
Why Is This Important?
Proper paperwork is critical to ensure that ownership is properly transferred. For example, a former spouse leaving the business does not want to find himself/herself liable for debts down the road because the paperwork was not done, or was done incorrectly. Likewise owners want due diligence to go smoothly if an investor or new partner is considering coming into the business. Proper paperwork and documents are also needed in the event of audit by the Texas Workforce Commission, IRS, or other governing bodies.
When a business is involved in a divorce, it’s important to have counsel assist with transferring ownership. Doing it right and on time minimizes risk and ensures smooth sailing going forward for everyone.