When you decide to separate from or divorce your spouse, you may be thinking about your day-to-day life, your children, and your future. What you may not consider right away is your business, but you should.
North Carolina business owners have to deal with detailed rules and laws when they separate. The value of the business, your spouse’s involvement with the company, and what the courts consider to be “fair” will all come into play.
This is not the time to sit back and hope for the best. You need to be actively involved in the discussions and proceedings as you separate from your spouse to ensure that you are treated fairly and your business remains as intact as possible.
For help, reach out to a qualified North Carolina divorce lawyer at the Breeden Law Office. And to learn more, keep reading.
As a business owner, the first thing you need to think about is how your business is structured. Ask yourself the following questions:
Consider whether you plan for your spouse to continue to be involved in the business after your separation. If not, who is going to replace them? And how much is that going to cost? Keep in mind that many couples decide to continue working together in a shared business after a separation or divorce.
Your spouse’s level of involvement will determine your strategy and what you can expect to get out of your separation agreement.
Most business owners do not truly understand what the value of their business is. You may have an idea of your take-home income and your accounts receivable, but businesses are valued much differently in North Carolina separation and divorce cases.
In the eyes of a family court, the value of your business will be based on gross sales, assets, and any other tangible or intangible things that add value. Even the goodwill your business has in the community can be assigned value.
Some of these items are impossible to know until you have formally started the process of valuing your business for your separation. This is usually the job of a certified public accountant who specializes in business valuation.
Although you cannot know your business’ absolute value before you begin the separation process, you should have a basic idea of the structure, the role your spouse plays, and how you plan to move forward after the separation.
In your separation or divorce, your business’ value may be split between you and your ex. Whether this happens depends on whether your business would be considered “marital property” under North Carolina law.
Did you start your business after you and your spouse were married? If so, your business will likely be considered marital property. North Carolina calls for “equitable distribution” of assets and debts when spouses separate.
On the other hand, if you started your business before your marriage and your spouse did not significantly add value to the company, it may be considered separate property. That would mean your business’ value would not be split between you and the spouse you are separating from or divorcing.
“Equitable” does not always mean “equal.” While courts will tend to separate couples’ assets and debts 50-50, some factors can change that split and still fall under the equitable distribution of property and assets.
How does this apply to your business? It may mean that the value of your company does not have to be split down the middle. For example, if you actively worked in the business and made big decisions and your spouse did not, it might be more equitable for you to retain the majority of the business’ value.
You need to ensure you are treated fairly and that your spouse does not get a larger share of your business than they deserve. An experienced attorney can help with that.