Divorce is a difficult and emotional process. But it can be even more challenging if you own a business with your spouse. A company is among the most valuable assets someone can own, and one or both partners may depend on the income for their living expenses after the divorce.
When handling a divorce with a business involved, it is in your best interest to partner with an experienced North Carolina divorce attorney. This way, you can be sure that your business interests are protected.
Consult with a Charlotte divorce attorney at Remington & Dixon who can ease the process and fight for your fair share of your business. Reach out to us today.
When Is a Business a Marital Asset?
If one spouse started the business before marriage, a divorce might not affect it if it remains a distinct property of the founding partner. However, many companies can lose this separate property status during the union.
If your company’s value increased during the marriage, the court could consider the added value a marital property. Typically, anything deemed marital property can be divided between the partners. In this case, such an asset can be subject to an equitable or equal distribution.
But if the business started after marriage and one partner contributed, the entire company qualifies as marital property. While the asset may be subject to distribution, this doesn’t necessarily mean that the court will award money from the company to your ex-partner, although this is possible.
Divorce and business don’t mix. Even if it was a wife and husband company, you could protect your interests by taking the necessary steps in advance. Be sure to involve an experienced attorney.
How Are Company Assets Shared in A Divorce?
Anything you earned, gathered, or purchased with your spouse while you were still married can be equitably shared during a divorce. Even if one partner was actively involved, the law assumes that their spouse’s support, income, and efforts at home contributed to the company’s launch and expansion.
But while each partner can earn an equitable share, “equitable” doesn’t always translate to equal. The courts tend to divide the debts and assets equally, but multiple factors can affect the split and still be considered an equitable asset and property distribution.
For instance, retaining a majority of its value might be more equitable if you were actively involved in the company and made vital decisions. Negotiations will determine who takes actual possession of the company when you part. If you agree with your spouse, you can secure the assets using a well-structured settlement agreement.
Depending on your respective roles and the nature of the entity, you can agree to:
- Award one partner the company while their spouse gets other assets like retirement accounts or a home.
- Buy out your partner’s share in monthly payments or one lump sum.
- Divide up the company into sections controlled by either spouse while they work like shareholders.
- Dissolve the entity and agree on who goes with specific accounts or clients.
- Sell the entity, then divide the net proceeds.
The best option for your situation will depend on the type of company as well as the company’s history, financial situation, and many other factors. So make sure you involve an attorney who will protect your interests.
How Do North Carolina Courts Put a Value on Family-Owned Businesses in Divorce?
For each partner to get their equitable share of the marital asset, you or the court must value the assets. Therefore, a business valuation is crucial. But don’t fret. Your divorce attorney can find the valuation expert for precise estimates based on the following:
- Book value: The current liabilities and assets adjusted by market factors
- Market value: The amount of how much an external buyer is willing to pay for the business
Most startup and medium-sized business owners don’t know how much their companies are worth. Thus, most end up overestimating their expected growth or undervaluing their current client relationships.
How to Protect Your Business During the Divorce Process
Several best practices can help your case if you’re facing a divorce and need to shield your business, including:
Negotiate with other assets
Equitable distribution doesn’t necessarily involve splitting all assets 50/50. Rather, a partner may retain some assets and leave others to their spouse. If your business interests are a priority, it’s better to sacrifice other assets and keep the company’s total ownership.
Determine priority assets
You can also protect your business interests during equitable distribution by prioritizing the assets or sections that are most important to you. After identifying them, you can find ways to hold onto them.
Conduct a business valuation
A business’ worth is often a point of contention during a divorce. In this case, the best move would be to conduct an independent business valuation.
Let A Reputable North Carolina Divorce Attorney Protect Your Assets
Any attempt to negotiate your business asset division during a divorce is difficult if you don’t involve an experienced divorce attorney. Protect your rights, interests, and business assets by partnering with a reputable attorney from Remington & Dixon, PLLC.
As a reputable North Carolina law firm experienced in divorce cases involving business ownership, you can count on our aggressive representation. We can ensure that despite the case outcome, you’ll have the resources and knowledge to inform your decisions. Contact us today.
FAQs About Divorce With a Business
Will I lose half of my business during a divorce?
Can I sacrifice an asset to get the business?
Jennifer is a founding partner at Remington & Dixon, PLLC. Jennifer concentrates her practice in the areas of family law, wills & estates, unemployment benefits appeals, and traffic. At Elon University School of Law, Jennifer was the vice president of the Public Interest Law Society and a member of the Family Law Society. During law school, Jennifer interned at the Elon University School of Law Field Placement Clinic with Legal Aid of North Carolina where she represented clients in domestic violence court proceedings.