Guiding families through all aspects of divorce in North Carolina

Attorneys at Raleigh Divorce Law Firm

Maintaining a business through divorce

On Behalf of | Mar 27, 2018 | Property Division |

Marriage is a major commitment, complete with the phrase “’til death do us part,” though it doesn’t always last that long. Marriage isn’t the only major commitment in life. Business ownership is a long-term investment that needs to coexist with whatever situations come up in personal life. Sometimes, that includes managing a business through the divorce process.

What happens when a husband and wife own a business together but want to end their marriage?

It’s a difficult situation, but common scenario. Business ownership itself often puts stress on a marriage, but marriages dissolve for many reasons ranging from infidelity to money management to simply growing apart.

Equitable distribution of a business

Family law adds a new wrinkle into joint business ownership. North Carolina divorce law divides property among spouses based on “equitable distribution.” The concept means that each partner will get roughly equal value. If a home is worth $500,000 and a retirement account is also worth $500,000, it’s possible that one partner keeps the home while the other gets the retirement account. Most property can’t simply be cut in half for fair value.

Sometimes this law means either an ex-spouse will sell their half of a business, or they will remain as a business partner after the marriage has ended. Many problems occur when half of a partnership pulls out. The ex-spouse may be unable to find a buyer, which can bankrupt a business, or maybe the ex stays on as a business partner but the former spouses can’t get along. These scenarios often make a family business a casualty of the divorce.

The case of EO Products

Business partnerships require time, close quarters and a strong working relationship. While many businesses don’t transition well through divorce, the right mindset and careful separation of roles can help keep things running smoothly.

The New York Times recently profiled EO Products, a California-based organic cosmetics company worth $50 million. What makes the story noteworthy is that the company was founded in 1995. In 2007, the couple divorced but the two ex-spouses maintained joint control of the company. They have separate homes, private lives and relationships, but they also run a dynamic business together and raised their children together. The article’s writer refers to it as a “substitute family” where they’ve kept cordial and important relationships without letting divorce tear their business apart.

A divorce settlement has long-term impact

While EO Products’ owners have many unique traits that helped help transition through their relationship change, they’ve been able to adapt to new situations and thrive together as business partners. Each has unique leadership qualities, and each respects the other’s decision-making. It’s a rare case where perseverance ultimately led them to greater success.

The details of a divorce agreement are likely to have long-term implications on the success of your business. Every divorce is unique and every business has its own challenges. Sometimes, it’s just not possible to work with an ex, and other times it may be impractical as children age, exes remarry or as the company grows. In any case, it’s important to separate family problems from business needs. By doing so, a divorce agreement can do what is best for the divorcing couple while also considering what is best for the business.