Getting divorced is difficult for everyone, but it becomes even more complicated for business owners. Between understanding what property is subject to division and protecting your assets, there are numerous legal issues to consider when facing a divorce in North Carolina. Fortunately, there are measures business owners can take to protect their business in the event of a divorce.
Keep reading to learn more about your options.
Protect Your Business in Advance
The best way to protect your business is to take proactive measures before you get married. No one expects to get divorced when they’re engaged or first married, but small business owners should consider taking steps that protect their company before marriage, if possible.
Build Your Business Strategically
As you launch your business, consider building in provisions that protect the company. Creating an LLC (limited liability corporation) or C-corporation allows business owners to title real estate and property to the business. While your interest in the business may be marital property, creating a formal structure helps prevent individual assets owned by the business from being subject to division in the divorce process.
Agree to a Prenup
Creating a prenuptial agreement might seem cold at first glance. However, this binding contract is an effective way to protect your business in the event of a divorce. This agreement, which gets signed before the wedding, outlines what happens to property, businesses, assets, and income if the couple separates or divorces. Prenuptial agreements are especially useful if both spouses are small business owners, together or separately.
It’s Not Too Late to Protect Your Business
If you’re a small business owner in North Carolina and you’re already married, there are still ways to protect your company.
Understand Separate vs. Marital Property
As estates are separated, it’s important to understand what property is considered individually held and what is shared. Any property that was acquired or grown during the marriage — including a business — is generally considered marital property. Other marital assets include retirement account contributions made during the marriage, savings accounts, or the family car and home.All marital assets and debts are subject to division. North Carolina is an equitable distribution state, which means that a 50/50 division is the starting point. However, you can still make arguments during negotiations and in court for an unequal division.
Separate property includes one spouse’s inheritance received during the marriage, a business started before the marriage, or a business interest that’s been protected ahead of time.
Create a Postnup
If you need to protect your small business because you didn’t implement protective legal measures before getting married, a postnuptial agreement is a good option.Like a prenup, a postnup is a signed agreement between spouses, but this type of agreement is signed after the marriage. A postnuptial agreement is a notarized document that can designate assets as separate property or outline how they are divided in the event of a divorce, including your business. Creating a postnup with the help of an experienced divorce attorney is a good option for those interested in protecting their business after they’re married.
If You are Already in the Divorce Process
If you are already in the divorce process and have a small business that is subject to division, you must have a value to assign to the business.
Obtain a Valuation for the Business
A business valuation determines the value of the business for property division purposes. As estates are divided during a divorce, knowing the value of a business (if it’s considered marital property) is critical for the division process.Businesses can be evaluated based on the value of tangible (savings, inventory, or equipment) and intangible assets (client relationships). The sum of any liabilities (loans, payroll, or anything else the business may owe) are subtracted from the value of the assets to determine the total value. The judge must receive a business valuation to include the business in the division. Contacting an attorney who has experience working with small business owners minimizes the time, risk, and stress involved in this process.
Hire a Lawyer — Whether You’ve Prepared or Not
Divorce can be emotional and messy. Having a lawyer on your side who understands the complexity of running a small business can make a difficult situation less challenging. A good lawyer can guide you through the valuation process, creating a postnuptial agreement, and property division, among other complicated aspects of divorce for business owners.
If you’re a business owner in Mecklenburg County facing a divorce, Myers Law Firm is here to support you. We’re experienced, compassionate divorce lawyers with a proven track record, ready to advocate on your behalf. To schedule your initial consultation with one of our attorneys, please call our Charlotte office at 1-888-376-ATTY (2889) or contact us using our online contact form.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.