According to DivorceRate.org, half of all marriages in the United States end in divorce. So to say that it’s quite common in the U.S. is an understatement. With divorce comes a division of assets which is known as equitable distribution in many states including North Carolina. Whether you realize it or not, an interest in a business acquired during your marriage (or with marital funds) is marital and will be divided, that is to say each spouse will be entitled to one half of the marital value of the asset. It makes no difference whether the business is solely owned, owned with other individuals or owned by both parties, and it normally does matter what entity the business operates as (corporation, partnership, LLC, etc.). But how can you divide a business?
Who Takes Ownership of a Business in Divorce?
Typically, one party will take ownership of the business and be credited with the value, meaning the other party will be entitled to half its value from other assets or benefits. In some cases a Court may order the sale of the business. In cases where both parties want the business, the Court can award it to either party (provided there is nothing in the corporate structure of governance that forbids that arrangement), have it sold, or award it to both parties (very rare). In determining which party will be awarded the business, the Court considers many factors including but not limited to:
- Which party actually owns or operates the business?
- Did the business pre-date the marriage and if so who owned it originally?
- Which party has the most expertise in business?
- Which party can maximize the value of the business going forward?
- Contributions of each party in operating or otherwise contributing to the business during the marriage.
Who Decides the Value of a Business in Divorce
Usually, a Court will determine the value of the business before deciding on distribution. Values, just like distribution can be done by agreement or decided by a Judge. In order to effectively prove the value of a business in Court, you will need an expert’s opinion. Usually the best expert will be a professional business appraiser, sometimes in connection with a forensic accountant. These appraisers can research and value a business based on significant training and education, and a forensic accountant can audit the records to seek out additional value such as unclaimed personal benefits or additional income/income potential. Many appraisers are accountants and can actually serve both functions for smaller companies. As one would expect, this is the most expensive method of proving value, with costs typically ranging from as little as $1500.00 for a very small business into the hundreds of thousands of dollars. Most small businesses can be valued for less than $10,000.00, and many for less than $5000.00, so it makes sense if the business itself is profitable or has many assets. Strong evidence such as this often reduces the likelihood of litigation also, which will relieve you of much stress and lessen your legal fees as well.
Another option to value the business is to use other individuals in the business or who have marketed your type of business. A court will value the opinion of anyone who has special knowledge or expertise in the market value of similar businesses, especially in the absence of any other expert opinion. The requirements for using an expert differ by state so please consult your attorney. A good example would be calling a developer who has developed and sold subdivisions in a particular region to value a small development company. They can authoritatively testify how much a development or development company is worth and why. Another example is using a realtor to testify as to the value of a real estate holding company by reviewing the marketability of its assets.
Contact a Raleigh Divorce Attorney to Discuss Your Marital Assets
The process of dividing a business in divorce is complex, even for the most business saavy individuals. The lawyers of The Doyle Law Group, P.A. can help you make sure you protect what you have worked so hard for. Don’t leave it to chance. That’s why it makes sense to work with an experienced attorney who handles family law and business matters.
This where The Doyle Law Group, P.A. can help. They have over a decade of experience in divorce and business law cases and can provide you with valuable peace of mind knowing that you are getting a fair distribution of your assets. Just call our Raleigh law office at 919-301-8843 or simply fill out the contact form on our website to get started.
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