Understanding the legal implications of divorce and small business ownership in South Carolina can help you create a plan to protect your investments and minimize the disruptions to your personal and professional developments. Under South Carolina’s property distribution laws, the court may classify your small business as marital property subject to division. Because these laws are nuanced and changing, it’s essential to have targeted and personalized legal advice from the outset.
The distinguished team at Turner Family Law appreciates small business owners’ concerns as they enter the divorce process or consider creating a prenuptial plan. We can help you create a premarital or postmarital agreement that aligns with your goals and situation, helping to protect your assets. Additionally, we can help you with business valuations for divorce proceedings. We can also help you skillfully move through a legal separation or divorce and negotiate a reasonable marital settlement agreement that works for you.
Understanding How Divorce Can Affect Your Business
Getting a divorce can impact your business in several ways. If you and your spouse own the business together, navigating how to sever or continue that joint ownership can be tricky after the marriage ends. You may decide that one spouse should buy out the other one’s shares or consider that when calculating an overall marital settlement. You may decide to continue that professional partnership after the divorce, which might require reevaluation and clarification of personal and professional boundaries.
Is Your Business Marital Property?
Your business may be marital property, but it depends on your specific situation. For example, if you have a prenuptial or postnuptial agreement, this may specifically say your business isn’t marital property.
Another factor determining whether your business is marital property is when you started the company. If you started it before the wedding, it may be nonmarital property. But, if you started it after, or if your spouse owns part of the business, the outcome may be different.
Determining Classification of Property During a Divorce
Under South Carolina law, most assets — including professional investments like a business — may be considered marital property if the spouses acquired them after marriage. Some items — like inheritance — would be exempt from this, even if the person received it after the wedding.
Other excluded assets might be nonmarital property that increased in value after the marriage.
A prenuptial or antenuptial agreement can override this rule if the contract is enforceable and clear about designating what is and is not marital property. Prenuptial agreements can be a valuable tool to help create clarity and predictability if the spouses divorce later.
Antenuptial agreements can also provide this same type of certainty and may be beneficial to have if you start a business after getting married.
Strategies To Protect Your Business During a Divorce
You can try to protect your business during a divorce in several ways. One way is to create a prenuptial or an antenuptial agreement.
These documents can be empowering resources to help create certainty and streamline the property classification and distribution process.
Another option is to transfer the business into a trust. Ideally, you would do this well before you start the divorce process. Additionally, you can put a buy-sell agreement in place, outlining what the business can do if a life change — like a divorce — involves one of the owners. A family law attorney with experience helping small business owners during a divorce can be an excellent resource. They can help you develop additional legal strategies to protect your investment.
The Role of a Prenuptial or Postnuptial Agreement in a Divorce Involving a Small Business
Prenuptial and postnuptial agreements can be powerful tools to help protect your business during a legal separation or divorce. Prenuptial agreements are contracts between two people engaged to be married. In the contract, the soon-to-be spouses outline boundaries about what they want to do with their assets if they divorce. They can discuss what they own currently — like a business, car, or house — and assets the spouses think they might acquire in the future.
Then, they could decide how to allocate ownership in a business later.
That said, if they have a prenuptial agreement in place, they should check the language of this before creating a new contract later on about how to handle business ownership. If the prenuptial agreement says one thing but another contract says something else, it can create confusion, and one contract may invalidate the other. An antenuptial agreement accomplishes the same goals as a prenuptial, but the spouses would sign this after marriage.
Valuing Your Business for Divorce Proceedings
The court may ask you to value your business as part of the property distribution process. The judge may require this to determine each spouse’s assets, even if these would be non-marital.
You would need to get your accounting records in order and contact an appraiser to value your business.
Options for Dividing a Business in a Divorce
You have many a couple of options in terms of dividing a business during a divorce. For example, one spouse can buy out the other one’s shares in the company. This might be a good option if you would like to continue running the business and want to avoid the possible strain of working with your ex. Another option is to close the business, sell it, and divide the payout between you and your spouse.
How a Family Law Attorney Can Help Protect Your Business
A family law attorney can be a helpful resource as you navigate this time of your life. They understand the legal nuances of divorce for business owners and can provide you with targeted solutions to help you through this process. A lawyer can evaluate your business and situation and determine what agreements you can put in place to create clarity. Or, they can help you understand how your existing contracts can influence the outcome in a property distribution context.
Turner Family Law: Small Business Divorce Lawyers You Can Trust
Owning a business and getting a divorce can be empowering and challenging. Leaning on a trusted advisor who can help you through the divorce and small business ownership process may help you gain your footing and take strategic steps forward.
The team at Turner Family Law is here to support you during this time. J. Michael Turner, Jr. provides full-service solutions to those going through or considering a divorce or separation. He also has the tools to help you create a postnuptial or antenuptial agreement that is enforceable and protects your assets. Reach out to us today by calling 864-778-2734 to schedule a consultation to talk about your situation.
