If a business owner is facing divorce in Greenville, South Carolina, the person might have come across the painful realism of equitable division. This term refers to the process of splitting up the couple’s marital debts and assets. What this means is that bank accounts, retirement accounts, homes, cars, stocks and bonds, and personal property must all be divided between the spouses as part of the divorce.
However, what many people do not realize is that businesses, regardless of how big or small they are, are also subject to equitable division, and the process of dividing a business when a marriage ends requires special attention along with a dedicated legal team to ensure the business owner’s interests are protected during the process.
Below, we answer questions that may concern the business owner who is getting a divorce in Greenville.
Does the Divorce in Greenville, South Carolina, Mean That the Spouses Each Own Half of the Business?
One complex issue that may result in confusion when a business owner faces the breakdown of marriage is that the business is owned by just one of the spouses. So, before the split, the other partner does not have an ownership interest in the company. But, does that mean that once the marriage ends, that spouse is suddenly granted half of the business?
The spouse who does not own the business will not immediately be rendered co-owner. But, that spouse could have an interest in the company due to its value that increased during the course of the marriage. So, the company’s marital equity is taken into consideration, just as with all other assets, and the business owner’s spouse is usually the one responsible for compensating the other spouse for the value of the interest.
What About Equitable Division?
If the business is marital property, the court will decide whether to split it 50-50 or in another proportion. Contributing financially or working for a business may strengthen a spouses’ claim in the company. For instance, a spouse that did not work whatsoever, but instead served as homemaker and stay-at-home-parent may receive as much as a 50 percent share in the value of the company. There is no rule of thumb, though, and each case is determined on its own unique basis. Usually, the court will allow the title owner of the company to keep the business but buy the other spouse out either in the form of a lump-sum or in installments.
How Can the Company Be Fairly and Appropriately Valued?
While companies are usually valued using regular accounting practices, the process may become more complex, given that the business owner and the spouse could disagree about the company’s true worth, especially in terms of more valuable companies. While the spouse that owns the company may feel that they know best what the company is truly worth, it could be the case that an expert will need to be employed to provide an objective and impartial estimate of the value of the business.
For this process, the expert will review the business’s books and all other accounting records, inventory and logging records, and determine the goodwill that the owner has put into the company, along with a range of other factors. Working with a dedicated Greenville, South Carolina divorce team is a good way to ensure that the experts have the most accurate and relevant data available to them.
The legal team will have the experience in arguing against any evidence that may be presented by the other spouse which could misinterpret the actual value of the company, since unless both spouses can agree on the value produced by the expert, the family court judge will decide what the company is worth and what happens to it during the divorce proceedings.
What if Both Spouses Own the Company in Greenville, SC?
If the spouses are business partners, too, divorce may present a few additional complications. Besides settling personal issues, the partners will have to decide whether or not to continue the business. Often, divorced partners decide to sell or close the company, or allow one of the spouses to buy the other out.
It should be noted that how the business is structured may affect the divorcing couple’s decision. Small businesses are often organized as general partnerships or classified as limited liability businesses. In such forms, the spouses will usually have a written agreement that details how the company should be run, along with instructions on how to either wind-up or dissolve the business.
If the business has further partners or co-owners aside from the couple, their interests will also have to be considered when deciding what to do with the company. This is particularly so when other family members are employees or investors. It is for this reason that it is important for any business to have a written agreement outlining the responsibilities and duties of all parties.
How Can Spouses Split a Company?
Instead of granting the spouse a share of the company, many divorced couples prefer to “buy out” the value of the spouses’ interest in the business. In order to buy the spouse out, it is essential to hire experts in business valuation to value the company and determine the spouses’ share of the value.
There are a number of methods for compensating the spouse without actually having to grant them a share in the company, but this is a matter that is best discussed with a family law attorney who has the experience of working with business valuators and who knows the ins and outs of divorce laws in our state.
Contact an Attorney Today to Discuss Divorce in Greenville, SC
Divorce can be a complicated process, and even more so when one spouse is a business owner. However, it is important to protect one’s assets, and this requires legal assistance. For those spouses who wish to protect their business during a divorce in Greenville, South Carolina, they should contact the team at Elliott Frazier today to discuss their options.
Angela Elliot Frazier is a Family Law Attorney who practices in Greenville, SC. She graduated from the University of South Carolina School of Law, and has been practicing law for 14 years now. Angela Frazier believes in helping you through one of the most stressful times of your life. Learn more about her experience by clicking here.