If you own a business, getting a divorce could have a big impact on it. It’s important to understand the basics of how divorce could affect the business and how to protect yourself. The most important issue is whether you started the business before or during marriage. Other issues include whether your spouse contributed to the business and how to assess its worth.
Business Started Before Marriage
If you started your business before your marriage, it may be your separate property. In North Carolina, assets that you acquired before divorce are separate property. Such property is excluded from the process of equitable division that occurs during divorce. In contrast, all marital property is equitably divided during divorce.
Even though you formed your business before marriage, your spouse may have contributed to the business during your marriage. For example, your spouse may have used his or her earnings to invest in the business or may have become a partner. In that case, the business may count as marital property. The court could decide to divide the value that your spouse contributed as part of equitable distribution.
As a result, it is a very good idea to sign a prenuptial agreement. An agreement protecting your business could state that the business and all its assets will remain your separate property (regardless of your spouse’s contributions). Or you and your soon-to-be-spouse could agree on a different division of property. If you are already married, consider a postnuptial agreement that protects your business.
Business Started During Marriage
When you start a business during your marriage without any protections in place, it may be part of the marital property the court equitably distributes if you divorce. This means that you could lose some or most of your investment to your ex-spouse.
If you start a business during your marriage, you still have options to protect it should you divorce in the future. For example, a postnuptial agreement could be executed by you and your spouse determining each parties interest in the case of divorce.
How Are Businesses Divided During a Divorce?
There are a few typical ways that businesses can be divided if they are part of the marital property:
- The business’s assets may be divided between the spouses
- The couple may sell the business and split the proceeds
- One spouse may buy out the other’s interest in the business
- Sometimes, the ex-spouses decide to keep running the business together after a divorce
Regardless of the way the business is divided, the court needs to assess the business’s value. Courts commonly look to the fair market value of a business, or what a third party would pay for it. They may also consider other factors and often assessing a business’s value may require the help of a business consultant or financial professional.
Let New Direction Family Law Assist You
If you own a business and have questions about divorce or pre/postnuptial agreements, the team at New Direction Family Law is available today to answer your questions. With decades of combined legal experience, our attorneys are knowledgeable, effective, and compassionate professionals. We will help you understand your legal rights and work hard toward your best outcome. We proudly serve clients in Wake, Johnston, Durham, and surrounding counties. Contact New Direction Family Law at (919) 646-6561 to schedule a consultation, or visit us at our website.
