Property division can be a complicated matter to handle. However, it can get more complex and stressful when you and your former spouse need to divide a business. Since this high-value asset has no fixed value, the courts have methods to address this issue.
Consider learning how courts divide businesses between parties to help you assess your financial situation post-divorce.
Classifying the business as marital or separate property
In North Carolina, the courts classify property as:
- Separate property: Assets solely owned by one spouse and obtained before marriage
- Marital property: Assets either spouse acquired during marriage
- Divisible property: Assets a couple gained after separating but before a court finalizes property division
If you started a business before marriage and maintained sole ownership, the courts may consider it as separate property. A business may be classified as marital property if you founded it during marriage or if your spouse contributed to its growth.
Determining value with specific strategies
Businesses fall under the non-monetary asset category since high-value assets do not have a fixed value. However, the courts use these methods to determine business value:
- Income approach: The court examines the business’s earning potential and cash flow.
- Market approach: The court compares your business to the selling price of similar companies.
- Asset approach: The court evaluates a business’s value through its tangible and intangible assets.
After settling a value, a judge will include it in the overall marital estate and proceed with the distribution process.
Preserving your business legacy
While a judge can order a final decision on division, they allow couples to decide on an agreement that honors the interests of both parties. Property buyout, selling and splitting proceeds and co-ownership are some of the many options a couple can take.
Encountering issues in divorces is possible, especially if both parties refuse to relinquish ownership. Consider consulting an experienced divorce attorney for invaluable advice about protecting your business.