Divorce is tough, especially when significant assets, like a family business, are involved. In high-asset divorces, protecting the family business becomes a priority. But can you keep it?
Understanding how it works can help you through the process.
How does North Carolina treat marital property?
North Carolina follows an equitable distribution model when dividing marital property. The court aims to divide assets fairly, though not necessarily equally. If the family business developed during the marriage, the court likely considers it marital property. This means the business could become part of the division during a divorce.
To keep the family business, you must prove it’s not marital property or show why you should retain ownership. This can prove challenging, especially if your spouse played a role in the business’s success. The court will look at factors such as the length of the marriage, both spouses’ contributions to the business, and whether the business increased in value during the marriage.
Can you protect your family business with a prenuptial agreement?
A prenuptial agreement is a helpful tool that can protect the family business before marriage. If the agreement clearly defines the business as separate property, the court likely won’t divide it during a divorce. Without such an agreement, however, the court may consider the business marital property if both spouses contributed significantly.
Can you buy out your spouse’s share?
One way to keep the family business after a divorce is by negotiating a buyout with your spouse. You could offer your spouse a fair market value for their share of the business. If you both agree on the valuation, this option allows you to retain control over the business while compensating your spouse.
How is the business valued?
Valuing a family business in a divorce is complex. Typically, an expert will appraise the business to determine its value. This process considers assets, liabilities, income, and future growth potential. The business’s value influences how much compensation you might need to provide your spouse if you want to keep it.
Even if your spouse doesn’t participate in the daily operations, they could still be entitled to a portion of the business’s value. Prepare for negotiations and potentially difficult discussions regarding its worth.