Business owners divorce

Divorce for Business Owners in Winston-Salem & Greensboro

Sound advice from experienced attorneys in the Piedmont Triad, NC

Business owners face unique challenges when divorcing, especially when the two spouses run a business together. You both likely have a lot invested in the business, including assets like cash, products, and real estate. All of these must be split as part of marital property distribution, which must be equitable and fair.

With over 25 years of business law experience, the divorce attorneys at Hartsoe & Associates, P.C. provide knowledgeable guidance about divorce may affect your business. We clearly explain your options and all potential outcomes. Contact us today about a consultation.

How does divorce affect a North Carolina business?

The manner in which the courts handle a business during a divorce depends on whether the business was established before or after your marriage. If you owned your business before you got married, your business is your separate property. Or, if you have a premarital or postmarital agreement in place, your business may also be designated as separate property.

If you started your business after you and your spouse married, the court considers it marital property and subject to equitable distribution. When making decisions about distribution, it considers things like each spouse’s role in the business, its assets, and the legal structure of the business. Typically, the business is treated like any other piece of property in a divorce.


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How does the court divide a business in a divorce?

When a business is considered marital property, the court offers several solutions for dividing or transitioning the business during a divorce. These can include:

  • One spouse buys out the other’s interest in the business
  • The couple divides the business’ assets through equitable distribution
  • The couple sells the business to a third party and splits the proceeds

Before making any decisions regarding a business, ensure you get a fair valuation of its assets and liabilities. This is called business valuation. Our Winston-Salem attorneys can work with you to get a professional valuation of the book value and market value of your business, including future earnings and losses.

Why get a business valuation?

The purpose of placing a value on the business is to determine each spouse’s share during the divorce. It stands to reason that the spouse with the most involvement in the business will want it valued on the lower side, while the spouse with more to gain will want it valued on the higher side. This is why each spouse typically brings in his/her own business valuation appraiser – when you do not have the true value of a business, you cannot divide it fair and equitably.

Our Greensboro attorneys recommend having a business valuation performed as close to your divorce hearing as possible. The value of a business can vary significantly over time, and a divorce can last from months to even years, depending on its complexity. A valuation completed at the beginning of a divorce may be completely inaccurate by the end of the divorce proceedings.

How is a business valued in a divorce?

Your business is likely one of the biggest assets in your marital estate, and it is important that it is valued properly. Business valuation is a specialized area of finance, and should only be performed by a certified professional. A business valuator will usually take one or a combination of three approaches when valuing a business:

  • Income-based
  • Asset-based
  • Market-based

Each approach has its own advantages and disadvantages, and some are considered more reliable than others depending on the circumstances of the business. Each spouse may hire his or her own business valuation expert for the court’s consideration.

What’s the best way to protect my North Carolina business in a divorce?

First, if you are considering a divorce but are worried about your business, consult with the attorneys at Hartsoe & Associates before making any announcements or filing any papers.

The best way to protect your business, especially a family business, is to include it in a premarital or postmarital agreement. This way you can spell out clearly how to handle the business in the event of a divorce or separation.

Additionally, ensure you:

  • Establish yourself as the sole owner, if possible
  • If your spouse works for you, pay them market rate
  • Keep detailed financial records
  • Pay yourself market rate

You may also consider a buyout (or “buy-sell”) agreement. This type of agreement is a contract between the owners of a company that establishes when, to whom, and at what price they can sell their interest in the business. The agreement comes into effect after “triggering” events like retirement, death, or divorce.

With a buy-sell agreement, owners can require the spouse of a divorced owner to sell back any interest in the business they receive in the divorce settlement. Talk to the experienced lawyers at Hartsoe & Associates, P.C. to learn more.

Can I “divorce-proof” my Winston-Salem business?

Yes, but it takes careful thought and planning. The most effective way to protect your business from a divorce is to put those measures in place before you get married. Although it is true that nobody gets engaged thinking about divorce, when you are a business owner, it simply makes good sense to consider any future possibilities.

When you are starting your business, consider adding terms to your operating agreement that protect the company if you or a co-owner go through a divorce. For example, limited liability corporations (LLCs) or other types of business structures can allow you to create a formal organization that ensures company assets will not be subject to division in a divorce.

Will I lose my Winston-Salem business in the divorce?

There is no hard “yes” or “no” answer to this question, but you can be sure that our attorneys will fight for you as hard as we can. Many of our clients are afraid they may lose half of their company or small business. However, this is typically not the case.

Whether or not your business is subject to distribution depends on whether it is considered separate or marital property. If it is your separate property, it is ineligible for distribution. However, if the court determines it is marital property, it will be subject to equitable distribution. This is where business valuation comes in, to ensure division is fair.

Our attorneys can help negotiate a beneficial solution that allows you to keep the business you’ve worked so hard for.

How can I protect the business when my business partner is getting divorced?

A common problem that arises for business owners is when one names a spouse as owner who is not involved in the business. When that owner gets divorced without a document in place to retain control of his/her shares, ownership and control of the business may be in peril.

This is where contracts like buy-sell agreements come in handy, and can protect the business from potentially disgruntled or even dangerous shareholders. Strategic attorneys can help you form airtight business operating agreements to keep your business protected.

Key business points to consider during a divorce

Although every situation and every client are unique, when a business and divorce are involved, keep the following considerations in mind when you meet with your attorney.

  • Does your business qualify as marital or separate property?
  • Did you and your spouse a premarital agreement? A postmarital agreement?
  • What was your spouse’s involvement in the business? Was he/she an owner or employee? Did he/she contribute in another way?
  • Does your business’ shareholder agreement address divorce?
  • How much has the business grown during your marriage? After your separation?
  • What is the most current value of the business?

If your business ownership is at stake in your divorce, talk to our Winston-Salem and Greensboro legal team today.

Legal guidance for business owners going through divorce

At Hartsoe & Associates, P.C., we provide knowledgeable advice and advocacy during divorce, including equitable distribution. Let us help you ensure your business remains in your hands. We serve families and clients in Winston-Salem and Greensboro, as well as the Piedmont Triad. To schedule a consultation with an attorney, please call 336-725-1985 or fill out our contact form.