If you are a male business owner in the Greensboro area facing separation or divorce, you know firsthand that your company is more than just an asset, it represents years of dedication, risk, and hard work. A business interest can add significant complexity to the property division process in a North Carolina divorce.
North Carolina follows the system of equitable distribution for dividing marital property. While the word “equitable” means fair, it does not automatically mean equal. North Carolina General Statute ($\S$) 50-20 provides that there shall be an equal division of property unless the court determines this is not equitable (Source: NC General Assembly $\ S$50-20(c)).
The Three Steps of Equitable Distribution
The equitable distribution process in North Carolina, outlined in NC General Statute $\ S$50-20, involves three primary steps. Understanding this structure is essential for preparing your case:
- Classification: Determining if property is marital, divisible, or separate property.
- Valuation: Placing a net value on all marital and divisible property and debt as of the date of separation (for marital property) or the date of distribution (for divisible property).
- Distribution: Dividing the marital and divisible property equitably between the spouses.
The core of your property division will revolve around classifying and valuing your business interest.
Defining Your Business Interest: Marital vs. Separate Property
The classification step decides which assets are subject to division by the court. For business owners in the Triad region, this is where complex questions about timing and contributions arise.
What is Marital Property?
Marital property includes all real and personal property acquired by either or both spouses during the marriage and before the date of separation, provided the property is presently owned (Source: NC General Assembly $\ S$50-20(b)(1)). This holds true even if the business is titled solely in your name.
If you started and built your business while married, the business itself, or your ownership interest, is generally classified as marital property and subject to division.
The Role of Separate Property
Separate property is not subject to division. This includes property acquired by a spouse before marriage or acquired by a spouse by devise, descent, or gift during the course of the marriage (Source: NC General Assembly $\ S$50-20(b)(2)).
If you owned the business before the marriage, your initial interest is separate property. The increase in value of separate property is generally considered separate property. Any increase in value resulting from the active efforts of either spouse or the expenditure of marital funds may be recognized by the court as having a marital component. This is a frequent area of dispute in the Guilford County courthouse.
Business Valuation: Protecting Your Legacy
Valuation is the most challenging step when a closely held business is involved. The net value of your business for divorce purposes is typically its value as of the date of separation.
The Economic Desirability of Retention
North Carolina law specifically recognizes the unique needs of business owners. G.S. 50-20(c)(10) instructs the court to consider: “The difficulty of evaluating any component asset or any interest in a business, corporation or profession, and the economic desirability of retaining such asset or interest, intact and free from any claim or interference by the other party” (Source: NC General Assembly $\S$ 50-20(c)(10)).
The Need for Qualified Appraisers
Valuing a business in a divorce requires more than a simple calculation. It necessitates the use of a financial expert, such as a certified business appraiser or forensic accountant. They will apply one or more recognized methodologies:
- Asset Approach: Values the company based on its assets minus its liabilities.
- Market Approach: Compares the business to similar companies that have been sold recently.
- Income Approach: Projects the company’s future earning power and discounts it to a present value.
Seeking an Unequal Distribution
North Carolina law presumes an equal (50/50) division is equitable, but a court can order an unequal distribution if an equal division would be unfair. The party requesting the unequal division carries the burden of proving that such a division is, in fact, equitable based on specific statutory factors listed in $\ S$50-20(c).
Factors a court shall consider under G.S. 50-20(c) when determining if an unequal distribution is equitable include:
- The assets and liabilities of each party at the time the division of property.
- The duration of the marriage, and the age, physical and mental health of both parties.
- Any direct or indirect contribution made by one spouse to help educate or develop the career potential of the other.
- Any direct contribution to an increase in the value of separate property which occurred during the marriage.
- The economic desirability of retaining a business intact (Source: NC General Assembly $\ S$50-20(c)).
Strategic Guidance for Business Owners Facing Divorce
The complexities of equitable distribution, especially when a business is involved, demand a compassionate and experienced legal perspective. At Kreider Attorneys at Law, we prioritize service and purpose-driven representation for clients in and near Greensboro, NC.
Our firm offers a unique and highly respected advantage: Attorney Kreider is a former District Court Judge. We bring this wise counsel to your case, providing us with a critical, informed understanding of how judges in the local courthouse analyze and rule on the intricate factors outlined in $\ S$50-20. We craft strategies designed to achieve fairness while protecting the continuity of your business.
If you are a male business owner navigating a divorce and need clear, strong legal counsel on equitable distribution, we are here to guide you. Contact us today for a consultation by calling 336-770-2017.