Kennedy Law Associates

Divorce and dividing the value of a business

When two people in North Carolina get a divorce and a business is involved, the process of property division can become complex. Establishing a plan before getting married or when setting up the business can help eliminate this complexity and ensure that both people receive what they are entitled to.

With a prenuptial or postnuptial agreement, a couple who own a business together might agree that they will continue to run the business in the event of a divorce, or they may identify one of them who will buy out the other. If only one person owns the business, the agreement may specify that it is separate property or that its value for purposes of property division will be based on its appreciation in value after the marriage. It might also specify what percent of this value the spouse will receive.

The organizing documents for a company can also serve similar functions. They may specify the percentage the spouse is entitled to while establishing that in a divorce, the business is not transferable. If financial records are kept meticulously, the process of valuation will go more smoothly. Personal expenses should not be mixed with business ones, cash transactions should be tracked and the sources of the company's funding should be clear and should not be marital assets if the business is to be kept separate.

Even without an agreement in place, couples may be able to reach an agreement about how they will divide property through negotiation instead of going into litigation. Mediation can often be helpful for couples who need to resolve conflict and instead of the adversarial approach of litigation, it focuses on a solution that is mutually acceptable. Even couples who have a pre- or postnuptial agreement that they are following still must negotiate child custody and support.

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