How does a Divorce Impact Your Business?
The divorce process can be complicated in general, but it can become even more challenging if you are a business owner. But don’t let that discourage you. A team of experienced divorce lawyers, particularly those that specialize in high net-worth divorces, will have the knowledge needed to help you navigate your divorce as a business owner.
Determination of Marital vs. Separate Property
During your divorce, your business will either be classified as marital or separate property. As a friendly reminder, separate and marital property are one of the cornerstone distinctions in any divorce proceeding. Separate property are assets that your spouse is not entitled to a portion of during equitable distribution. Marital assets, on the other hand, are assets that are going to be included in the equitable distribution of your marriage.
In the state of New York, a business is considered a marital asset if that business was established during the marriage or the value of the business increased during the marriage. If your business is considered a marital asset, the Court will typically have the business valued by a neutral third-part business estimator. This is in order for the business to be distributed equitably, or to fix a monetary value for a buyout of one spouse from the business and its interests. An important takeaway is that your business may ultimately be determined to be a marital asset, even if it was owned by one spouse prior to the marriage, or even knowing one another.
The Role of a Prenuptial/Postnuptial agreement in Protecting Your Business
As we discuss in depth on our prenup page, Prenuptial agreements have a valuable role in protecting your existing property going into a marriage. One of the many types of properties your prenup can protect is a business entity. If you outline your business interests/business ownership as your separate property and not marital in a signed prenuptial agreement, and explicitly state that any growth and/or financial gain in the business during the course of your marriage is not to be marital, you may be able to avoid some headaches down the road in the event of a divorce.
A postnuptial agreement is a document very similar to a prenup, with the marked difference of it being signed after your marriage has taken place. A postnuptial agreement, however, can help you outline your business and any gains from the business as separate property, in the ultimate event of a divorce. If you are a business owner, you may want to speak with us about a prenuptial agreement, or postnuptial agreement if you are already married.
Is the Court Always the One That Decides How Your Business Will Be Distributed?
So, if you do not have an existing prenuptial or postnuptial agreement and you have found yourself facing a divorce, you’re probably wondering if there is any way, other than having the Court intervene, to address your business during a divorce. The answer is YES.
Most entrepeneurs not only have a financial stake in their business, but also significant emotional investment in their business. After all, they’ve likely poured their blood, sweat, and tears into creating and running their business. If this is the case for you and your business, you may want to consider negotiating with your spouse in the attempt to come to an agreement via stipulation of settlements, as opposed to letting the Courts determine how the business will be divided. You may be able to get a more favorable breakdown of the business by compromising with your spouse than you would have if the Court was the ultimate decision maker.
Talk to Us to Ensure You Are as Protected as Possible
If you are worried about how your high-asset divorce may affect your business, you should contact us today. Our attorneys have decades of experience fighting to protect our clients’ best interests. Our team is very familiar with New York Divorce and Family Law, particularly in situations where there is a lot at stake. We protect your interests to make sure that you can thrive. Schedule your consultation by clicking on the link at the top of the screen, or call us at (914) 615 9058. Our mission is to protect what’s most important you.
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