When a couple starts a business together, they generally do not anticipate a divorce down the road. Yet things change, and even the best-laid plans can go awry.
If a couple jointly owns a business, the fate of that business after a divorce depends on the unique situation. Many cases, however, require complex asset distributions.
Divorce mediation for business owners
A couple that owns a business together should strive to reach a divorce settlement via mediation rather than taking the case to court. Mediation leaves the power in the couple’s hands as to what to do with a jointly owned business, rather than giving the final decision to a judge. A common solution is for one spouse to buy out the other. Another is to sell the business and to split the profits equitably. During mediation, the couple will ultimately be able to decide the fate of the enterprise.
Distribution of marital property in North Carolina
North Carolina is an equitable distribution state, according to § 50-20. Based on this law, the courts will divide all marital property fairly between the spouses, rather than splitting it 50/50. Marital property refers to all assets one or both spouses acquire during the marriage. Nonmarital property, or property acquired prior to the marriage, will not become part of the equitable distribution.
If two people started a business together during the course of their marriage, the business would fall under the category of marital property in North Carolina. It would thus become relevant during a divorce hearing. Should the divorce case go to court, a judge would listen to both sides and take many factors into consideration to determine how to split marital assets, including the jointly owned business.
The factors a judge may consider include the income, assets and debts each party accumulated during the marriage, as well as how long the marriage lasted and any child custody matters. Once the judge has received all the information he or she needs to make a decision, the judge will decide how to divide interest in a business.