What Happens to My Business If I Get Divorced?
If you’re a business owner, your company plays a vital role in your life. You probably rely on your company as your primary source of income, and it may even be more valuable than your home. If you are involved in a divorce, it’s understandable if you’re worried about what will happen to your business.
Divorce can already be a complex and turbulent process, but owning a business can rock the boat even harder. Unless your business is considered separate property, it is otherwise marital property and subject to equitable distribution during divorce.
What Is Equitable Distribution?
Most states abide by equitable distribution in determining how much of the marital property each spouse gets in a divorce. Unlike the minority of states that abide by an equal distribution of marital property, states like North Carolina consider how much of the marriage’s property each spouse will need.
This is done by taking the following into account:
- Assets and debts held by each spouse
- Whether assets and debts are considered separate, marital, or divisible
- The value of each asset or debt
- Each spouse’s earning potential
- How each spouse attributed to the accumulation of marital property
- Age and health of each spouse
Equitable doesn’t always mean to evenly divide marital property, it’s not certain that spouses will walk away with even shares of the marital pie. That said, not everything people own is considered marital property.
Why Separate Property Matters
Separate property is anything someone acquired before the marriage or as an inheritance during marriage. Separate property is considered off-limits for equitable distribution, so the value of a business started before someone was married could be protected from consideration in divorce proceedings. The same can be said for a family business that someone inherited even if they were already married.
It’s important to guard against commingling separate property with marital property. Failing to do so could cause the separate property to be included in a marital estate and subject to equitable distribution as a result.
Potential Outcomes for a Business Subjected to Equitable Distribution
If your business is considered a marital asset, its legal structure, assets, and each spouse’s role in the company are considered when determining an equitable outcome. The best possible outcome is one in which both spouses agree with what to do with the business.
If spouses can’t agree, the court typically divides the business in one of the three following ways:
- One spouse retains ownership of the business but must buy out the other spouse’s ownership interest. This can be done with a single lump sum, through payments made during a period of time, or by transferring additional assets.
- Liquidate the company and divide its assets in an equitable manner.
- Both spouses retain ownership interests in the company and run it together after the divorce.
Do You Need Help Protecting Your Company?
If you own a business that could be considered marital property in your divorce, you need to seek legal representation to help you protect it. At David Self Family Law and Mediation, our team is dedicated to helping our clients achieve their goals and reach the best possible outcomes in divorce proceedings.
We understand how much effort and work you put into making your business into what it is today. Our attorneys offer legal representation that includes divorce mediation where you and your spouse can work out an amicable agreement that protects your business interests.
Learn more during a confidential consultation. Schedule yours by calling (980) 223-3340 or by connecting with us online.