According to the Centers for Disease Control and Prevention’s National Vital Statistics Report on Births, Marriages, Divorces and Deaths, there were 65,817 marriages and 36,708 divorces in North Carolina in 2009. The high rate of divorce means that many people face navigating a divorce while owning a business.
Cathy C. Hunt, attorney with Gailor, Hunt, Davis & Taylor in Raleigh shared information with Shop Talk about marrying and divorcing while owning a small business. Here are her edited comments:
Generally, if a person owns a business before marrying, that person will keep the business after a divorce. Although, it is valuable to prepare for marriage if you own a business.
It will be valued as of the date of the marriage. Any increase in value to the date of separation will be considered marital property, and the non-owner spouse will take another asset that is equal in value.
If spouses start a business together, one spouse is usually more involved than the other. The spouse who can run the business without the other generally gets the business in a divorce. The other spouse is awarded assets of the same value.
The best way to protect the business is with a prenuptial agreement, which is difficult to overturn if drafted properly. It’s best for both parties to obtain an attorney and sign the agreement at least 30 days before marrying.
If an owner does not have a prenup, the increase in value of the business is going to become a part of the marital estate and will be distributed in the event of divorce.
Parties can get a post-nuptial agreement that will designate what will happen with the business and other assets if there is a divorce.
If an owner spouse actively works in the business that the other spouse owned before marriage, that spouse will be entitled to the increase in value of the business from the time of marriage until separation.
It is uncommon for a business to be sold because of divorce because it is the source of income needed to pay expenses.
Divorces are costly. Valuation of a business can run from $10,000 to $60,000. Legal fees vary depending on all of the issues that are involved; the business is just one factor in a divorce.
Watch our video on YouTube Business in Divorce North Carolina
Who gets the family business in a divorce? Will I continue to co-own it with my spouse? Will I have to buy out his or her interest? How will my business be valued? Will I need to hire an expert? In this episode, host Jaime Davis and her law partner Nicole Taylor discuss the answers to these questions and more concerning what happens to the family business in a divorce.