North Carolina uses equitable distribution to divide property in a divorce, particularly when a couple has significant shared assets. These guidelines advocate for fair distribution of marital assets and debts.
Business owners who worry they may have to split the company in a divorce should review strategies to designate the business as separate property.
Create an agreement
Upon starting a business, an entrepreneur may want to create a prenuptial or postnuptial agreement. He or she may classify the business as separate property or establish a specific ownership percentage the spouse would receive in a divorce. These provisions can also appear in the business’s founding documents, such as a partnership agreement.
Document spousal contributions
When a spouse works for the business in any way, he or she may have a legal claim for part of the business. Keeping careful human resources records can help a business owner prove his or her spouse’s level of involvement in the company.
When a person does not take a salary from his or her own business, the court can construe this as a failure to contribute to the marriage and allocate more assets to his or her spouse. A business owner should always pay oneself reasonable compensation depending on his or her role in the company’s operation.
If the business dates prior to the marriage, the spouse may still have a legal claim to its profits. For this reason, North Carolina business owners who face a divorce may want to seek a professional valuation of the company to ensure a fair property division arrangement.