What happens to my company if my business partner gets a divorce?

North Carolina is an equitable distribution state. Inequitable distribution states, the court presumes splitting marital property equally is a fair starting point. Now, there is flexibility in a court’s decision on circumstances where equal distribution may be unfair. During a divorce, Forbes suggests that your business partner’s share in the business becomes a part of the debate.

A partner may decide to pay out the spouse with stock. In this case, the spouse may become a partner his or herself. This decision affects your stock and the decisions made in the company. If the ex-spouse has voting rights, then he or she will be a part of how you run the company. If the spouse already worked for the company, this may not be a problem. If you have preferred instead of common shares, then your partner cannot transfer voting rights.

On the other hand, a business partner may decide to liquidate interest and pay his or her spouse. If your partner chooses the second option, then the company undergoes a valuation process. This determines the value of the interest. Now, this process is more invasive. It involves providing financial information and other documents to a third party. In addition, employees of the company may have to perform interviews.

After a divorce, companies concerned with the information shared during the process may insist on a confidential agreement. This will ensure that a third party cannot use any information about your business for other matters.

This information is for educational purposes regarding the divorce of a business partner. By no means should the information here serve as legal advice.

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