QUESTIONS ABOUT BUSINESS AND DIVORCE?

By CATHY C. HUNT Special to 919 Magazine

H OW CA N B U S I N E S S OW N E R S P R O T E C T T H E I R B U S I N E S S , I F T H E Y O R A B U S I N E S S PARTNER GET DIVORCED?

A common problem that business owners make is naming a spouse as an owner who doesn’t really work in the business. Difficult operating issues arise if spouses divorce and a non-involved spouse has rights as an owner to the books, records, and bank accounts. For example, in a divorce case, a husband and wife were 50/50 shareholders in a business although the wife did not work in the business.

When there was a domestic dispute, the company came to a complete standstill, because the wife used her rights as an equal share-holder to access assets in the business. The parties spent substantial funds in court trying to gain control of the company. Meanwhile, the company was in complete deadlock.

The best way to protect a business from a potential divorce is to only name as owners those that are genuinely involved in the business. Another protection that business owners can put in place is to have a buyback provision in their corporate agreements to retain control of shares if an owner gets divorced and to provide the price at which the shares may be purchased.

I HAVE BEEN COMMUNICATING WITH A ROMANTIC INTEREST ON MY WORK EMAIL AND PHONE. CAN THIS INFORMATION BE OBTAINED BY MY SPOUSE IN A DIVORCE?

Yes, if either spouse files a lawsuit with allegations of adultery, they can request emails, text messages, and phone records from the other spouse through a process called discovery or from a business by subpoena. A spouse may also issue a subpoena to a company to take possession of electronic devices for copying or to require the company to produce emails, texts, and phone records. If you don’t want your company dragged into your personal divorce, don’t use a work email or device for non-work purposes.

‘ I F Y O U D O N ’ T W A N T Y O U R C O M P A N Y D R A G G E D I N T O Y O U R P E R S O N A L D I V O R C E , D O N ’ T U S E A W O R K E -M A I L OR DEVICE FOR NON-WORK PURPOSES.’

----- CATHY C. HUNT

G A I L O R , H U N T , J E N K I N S , DAVIS, TAYLOR, AND GIBBS PLLC

MY SPOUSE AND I OWN A BUSINESS TOGETHER. WHO IS GOING TO GET THE BUSINESS IF WE DIVORCE?

It depends. A business owned by both parties and created during the marriage is considered marital property and would be subject to distribution in a divorce. The parties can decide who gets the business, or if they can’t decide, the court will likely award the business to the spouse who is more involved or capable of running the business. In that case, the business must be valued and the retaining spouse will pay the departing spouse for his or her interest in the business. That payment may be in a lump sum, over a period of time, or it may be offset by other marital assets.

HOW WILL MY BUSINESS BE VALUED IN DIVORCE?

Often a business is one of the most valuable assets in the marital estate. Business valuation is a highly specialized area, and should only be done by a certified business appraiser. Divorcing owners often want to hire their CPA to value the business to save money or because they do not consider the potential far-reaching effects on the business.

Divorcing business owners must be careful not to compromise their entire case by getting a business valuation that cannot withstand challenges to its accuracy in litigation. Having the right team of legal and financial advisors experienced in business valuation and complex financial cases is the best protection against the far reaching effects of having a business valued incorrectly in a divorce case.

For more information, contact Cathy C. Hunt at Gailor, Hunt, Jenkins, Davis, Taylor and Gibbs PLLC at chunt@divorceistough.com or 919-832-8488.