Strategic Solutions For Dividing Businesses In Divorce

Going through a divorce can be particularly challenging for spouses who own their own business or professional practice. These types of significant assets require additional attention to detail when determining property division. If you own a business, you probably are concerned about how your divorce will impact daily operations and the future of your company. Do you have to sell? Can your spouse claim part of the business? Will all your hard work go to waste?

At Ellis Family Law, P.L.L.C., our experienced North Carolina divorce attorneys for business owners are here to provide you with the answers and reassurance you need to protect your company and make smart decisions that will yield favorable results. We proudly represent business owners throughout the Triangle area from our offices in Durham, Pittsboro and Wake Forest with these complex matters.

Types Of Businesses We Handle In Divorce

There are many different types of business owners across North Carolina. Our skilled divorce lawyers have helped resolve divorce issues for all kinds of businesses, including small and mid-sized businesses, and professional practices for doctors, dentists, lawyers, accountants, psychologists, architects and much more.

Businesses and professional practices are large assets with many moving parts that must be considered when going through a divorce. As a business owner, you might have employees working for you that can be impacted by this process as well. We understand that you don’t want your divorce to affect the day-to-day operations of your business. We take great care to review and develop a strategy that will minimize the impact on your business while also aligning with your divorce goals.

Is A Business Marital Property?

One of the most complicated parts of businesses and divorce is determining whether they qualify as marital or separate property. Marital property involves any assets that were acquired during the marriage, while separate property involves previously owned assets or assets acquired during marriage that have been kept separate from your spouse, such as an inheritance.

Businesses can often cross the line between marital and separate property, which makes them more difficult to divide during property division. Here are some of the most common scenarios that occur with businesses and divorce:

• Each spouse owns 50% of the business
• One spouse owns the business, but the other spouse takes part in business-related tasks
• One spouse owns the business while the other spouse is generally not involved at all
• One spouse inherited the business

When spouses share ownership of the business, it’s considered marital property as both spouses have a claim in the business’ value. However, when one spouse owns the business and the other spouse occasionally helps with certain tasks, that spouse can claim some part of the business during property division proceedings. Even if the business is solely under one spouse’s name, involvement from the other spouse can make the business marital property.

If you started your business prior to marriage and managed to keep it completely separate from your spouse, it may be considered separate property and thus ineligible for property division. Your spouse cannot claim a part of the business’ value. While inheritances are generally considered separate property as well, if you inherited a business and allowed your spouse to be involved in business matters, then the business may become marital property, and your spouse can claim a part of the value.

These complexities in business ownership can make navigating divorce more challenging for business owners. Prenuptial or postnuptial agreements may help business owners protect their companies well ahead of a divorce. Our divorce lawyers for business owners are here to provide you with the guidance you need during this challenging process.

What Is Business Valuation?

When dividing a business, you must first determine the value of the business. This is typically done with the help of professional business appraisers, who will thoroughly review your business to assess its worth. There are three main methods to determining the value of a business:

• Market approach: This option looks at other similar businesses in your industry and area to determine what value they are selling at within the past one to three years. This helps provide a baseline of business value in your field. Other factors may be considered that can either add or subtract from the market value to determine the final total value of your business.
• Income approach: With this business, appraisers will consider the income of your business in a given year and estimate how much your business would continue to make over a certain period of time in the future. This will provide them with the value of the business that will be used during property division.
• Asset approach: Businesses have many different assets that work together to make the business function. This approach calculates the total of those assets and then subtracts the total value of any business liabilities. The final total is then the business value used during divorce.

No matter which method you choose to determine the cost of your business, it’s important to complete this step before going into property division proceedings.

What Will Happen To Your Business?

Now that you have determined the value of your business, what comes next? Will you be able to keep your business as is? Or will you have to sell? There are multiple options regarding how to handle a business or professional practice in a divorce. These are some of the most common choices:

• Sell the business: While this may not be an ideal option for many business owners, selling the business and splitting the profits between the spouses is often an easy and simple way to resolve property division issues. This may be advisable for spouses who own an equal share in the business already and have decided to end the business rather than figure out how to continue operations.
• Buy out the other spouse: When one spouse wants to keep the business, they may be able to buy out the other spouse’s share in a lump-sum payment. This can be costly, however, as you will have to have that kind of money ready. For example, if your business evaluation totals at $100,000 and your spouse is determined to have a 30% share in the business, you could pay them $30,000 and retain ownership of the business without further issues. This is often ideal for spouses who may solely own a business, but their spouse was involved in some business-related tasks during the marriage.
• Continue as business partners: If your spouse has a claim in your business but you’re unwilling to sell or you cannot buy out your spouse’s share, you could consider continuing running the business as partners. This can be a complicated option as it may require establishing new business roles or naming your spouse as a shareholder. You and your spouse may not see eye-to-eye on how to run the business, which can further complicate matters. However, some spouses may find this option viable, especially if they already own the business together and don’t want to sell.

Our divorce attorneys understand how complex this situation is and how stressful it might be for you as a business owner. We want to provide you with all the information you need to make a smart decision about your company. Our goal is to work closely with you to understand your goals – whether it’s to sell or keep your business as it is – and will develop a strategy that will achieve a satisfactory outcome.

Consult With Our Durham Divorce Attorneys Today

If you’re a business owner going through a divorce, we have your best interests at heart. We’re here to help you protect your rights and your business every step of the way.

Call us today at 919-944-4811 to schedule a consultation or email us online. We serve business owners throughout the Triangle area and have offices in Durham, Pittsboro and Wake Forest.