Dividing Your Family Business After A Divorce

A family business can be a great way to balance responsibilities, ensure quality time with your children and keep your family prospering financially. When your business partner is also your life partner it is often easier to handle complications. When the marriage frays, the family business is impacted.

Equitable Distribution

The family business is usually marital property or part-marital property. In North Carolina, when a couple separates, the marital property is divided in “equitable distribution.” The company presents a challenge since most businesses can’t be divided into two parts.

Buying Out

Most often, one spouse retains the business asset and pays the other spouse for his or her share of the marital portion. The valuation of business ownership can be extraordinarily complex involving appraisals and specialized consultants. It can also be a straightforward determination of book value. Once a determination is made about the company’s marital value, structuring a pay-out occurs. Factors to consider when structuring pay-outs include ability to pay, operating capital, work-in-progress, accounts receivable, cash flow, forecasts, installment agreements, security instruments, offsets by using other marital assets, and many other factors.

Co-Owning

Another option for a divorcing couple is to share the business as joint owners. Written Operating Agreements can be negotiated that specify the role of each spouse along with terms relating to management, oversight, compensation and other financial matters. This option is challenging but some couples do manage to successfully co-manage the family business.

Being the Outsider

A troublesome consequence of a family business and divorce occurs when one spouse becomes unemployed as a result of the marital separation. This fact can occur in small family businesses as well as large complex organizations. Alimony and child support payments are impacted when a spouse is no longer earning a salary or receiving benefits from the family business.

Experienced Advice

Valuing and dividing a family business takes experienced, competent, legal advice from lawyers who have tackled these complex issues before. The family lawyers at Parker Bryan Family Law have the experience and legal know-how that is needed to address the issues that arise when a family business is involved.