Business owners face unique issues when divorce proceedings begin.

• Author: Sterrett, Tate K.
• Position: LAW 2012 JOURNAL

Considering the ever-changing scope and complexity of business law, it helps to have a legal champion in your corner to help navigate the intricate and potentially confusing nooks and crannies of local, state and national laws and regulations. That's where BUSINESS NORTH CAROLINA'S annual Law Journal comes in. Top lawyers practicing in such specialties as business litigation, privacy and information security, mergers and acquisitions and family law outline common legal issues Tar Heel businesses face and detail strategies for managing--and avoiding--litigation. This year's topics include state and local economic-development grants, e-discovery and rules for preserving electronic data, how divorce cases can invade the workplace and tips for successfully handling business litigation. In addition, a former appellate judge taps into his years on the bench to offer suggestions for mounting a successful appeal. We would like to thank the authors for their insight and their firms for their financial support, which makes the Law Journal possible.

Certain divorce issues are unique to business owners. This article highlights a few of the most common property and support issues so divorcing business owners will be aware of what is at stake and can plan accordingly.

Business valuators

Any interest in a business can be valued by a valuation professional for equitable distribution (property settlement) purposes. Methods for valuing closely held businesses include: the cost approach (book value), the income approach (capitalization of the income stream), and the market approach (using comparable sales). Retaining a good valuation professional can be as important as retaining a good divorce lawyer, but you want the lawyer to hire the valuator so, at least initially, the report will be a protected attorney-work product.

Buy-sell agreements

Most business owners with partners have operating agreements or shareholders' agreements that contain buy-sell provisions with formulas or guidelines for determining the value of the ownership interests. While the buy-sell provisions are instructive, they are not conclusive in determining value for divorce purposes.

Book value

While book value might be the most objective and easiest way to value a business, it generally produces the lowest valuation number and is usually disregarded or weighted less than the values produced by the other approaches.

Separate property that increases in value

If a business is started before...