Getting divorced in North Carolina can be complex, especially when a family-owned business is involved. If you’re a small business owner, your business isn’t just a source of income—it’s something you’ve poured your heart, time, and money into. But what happens to this piece of your life if your marriage comes to an end?
Your Business in the Divorce Process
In North Carolina, almost everything you’ve acquired during your marriage, including any business you’ve started, could be divided between you and your spouse if you divorce. This rule applies even if you were the only one running the business. North Carolina law sees the support from the non-participating spouse—be it financial, emotional, or taking care of the home—as crucial to the business owner’s success. Therefore, both of you might get a share of the business’s value when you part ways.
Deciding Who Gets What
When it comes to dividing the business, it all boils down to negotiation. You have a few paths you can take, such as:
- Giving one spouse complete ownership of the business while the other gets different assets.
- Buying out your spouse’s share of the business, either all at once or over time.
- Splitting the business so both of you have control over certain parts.
- Dissolving the business and deciding who keeps specific clients or accounts.
- Selling the business and sharing the profits.
The best option depends on your financial situation, business background, and your relationship dynamics.
Putting a Price on Your Business
To divide the business fairly, you need to know its worth. This typically means bringing in a specialist to value the business, looking at what someone else would pay for it and what its assets and debts are worth. Since it’s easy to overestimate or underestimate the value of your business, having an expert’s opinion is crucial for a fair division.
What If the Business Was Yours Before Marriage?
If the business was originally yours before marriage, it’s generally considered separate property in North Carolina.
However, the business could develop a marital interest in a couple of ways. One clear way is by directly investing marital funds into the business. Additionally, the mingling of personal and business finances can also lead to the business being treated as marital property. This often occurs when personal and business funds are combined in a single bank account, and expenses for both are paid from that account without clear separation.
If you cannot distinctly trace the separate components, the law typically assumes the entire account is marital. To safeguard your business from becoming entangled in potential divorce proceedings, it is advisable to avoid commingling funds and consider a prenuptial or postnuptial agreement.
Working Together and Getting Divorced
If both you and your spouse worked for the business, a divorce could mean a loss of income for the non-owner spouse. Offering support or a severance package can smooth things over and lead to a fairer division of the business.
The Fine Print in Business Agreements
If your business involves other family members or partners, pay close attention to any buyback clauses in your business agreement. These clauses might require the company to buy back any shares going to a divorcing spouse, affecting the value of the business and your ownership stake.
Keeping Your Business Intact
Divorcing when a family business is involved requires careful planning and negotiation. You should value the business, decide on the best way to divide it, or use legal agreements to protect your interests. Working with legal and financial experts is key to making sure both your and your business’s needs are taken care of during the divorce.
Krista Stallard
Krista Stallard is an experienced family law attorney specializing in divorce and custody cases, passionate about alternative dispute resolution, and committed to providing excellent legal representation to her clients.
Are you facing a divorce with a family-owned business in North Carolina? Get the experienced guidance you need to protect your business and ensure a fair distribution. Contact us now for personalized advice and strategies tailored to your unique situation.
