There are more than 30 million small businesses in America according to the US Small Business Administration (SBA), comprising 99 percent of all companies and employing 58.9 million workers. If you are the owner of one of these thriving organizations, you probably have grave concerns about what happens to your interests in the event of divorce. You have certainly invested substantial time and effort in establishing a successful company, and there is a chance that your spouse contributed as well. The personal nature of an asset that is also your livelihood makes business interests some of the most complicated issues in a New York divorce case.
It is important to work with experienced legal counsel with any high asset or net worth divorce proceeding, but this point is even more critical when you are a primary stakeholder in a company. Your New York business interests in divorce attorneys explain some of the key laws and guide you through the process, but you should be familiar with some basic concepts.
- Equitable division laws apply to interests in a business. Though the specifics are much more complicated than other property you address in divorce, ownership in a business is an asset. It is necessary to establish whether it was acquired before or after the wedding date, and New York State laws on equitable division of marital property apply. The complexities enter the picture when the lines are blurry on when the company was started, since it could bear characteristics of both marital and separate property. There may also be questions about division when your spouse contributed to developing the business.
- There are multiple ways of addressing your business in divorce. The principles of equitable distribution provide a few different options for handling your business interests, including:
- Selling it to a third party and dividing the proceeds;
- Having one party buy out the other’s interest, which may be accomplished through a credit or offset against other marital assets or alimony arrangements; or,
- Continuing on with the business as partners, a potential challenge for divorced spouses.
- The parties can agree on how to handle business interests. Based upon the option described above, keep in mind that you can enter into an agreement instead of litigating over your business in court. New York law encourages marital settlement agreements as a way of dividing up marital property, including ownership of a company.
- You will need to conduct a business valuation. Regardless of whether you agree or litigate, it will be necessary to retain accounting professionals to establish a value for the company. Both parties need to know what it is worth in the context of other marital assets. There are numerous methods for business valuation, including those that focus on:
- The stream of revenue;
- The value of stock shares; and,
- Liabilities versus assets.
- Do not underestimate the value of goodwill and reputation. As you consider what your objectives are with your business in the divorce process, do not forget to assess the value of goodwill and reputation – especially if you are the face of the company or bring special skills.
A New York Divorce Lawyer Can Advise You on Handling Business Interests
These are just a few of the concepts you must understand if you are a business owner going through divorce, but you can trust your attorney to deal with the critical details. Our team at The Mandel Law Firm is dedicated to protecting your interests, so please contact our Manhattan office to speak with a skilled lawyer. You can schedule a consultation by calling (646) 770-3868 or going online. Once we review your situation, we can develop a strategy for achieving your goals.