All divorces include the division of property. Who receives what asset can be among the most hard-fought battles when a married couple splits. The complications surrounding equitable division often grow exponentially when one or both spouses own a business.
Business Valuation in Equitable Distribution
New York is one of 31 states that follow equitable distribution rules in dividing assets and debt in divorce. Marital property is divided fairly, not necessarily equally.
Marital property is anything earned or acquired during the marriage. Separate property is acquired or earned by either spouse before the marriage. Only marital property is subject to division. Each spouse retains ownership of their separate property. Spouses can negotiate these issues outside of court or a judge makes the decision if the dispute is brought before the court.
Determine if the Business Is Marital Property
When a business is involved, the first step is to determine whether the company is marital property and subject to division.
The answers to the following questions can help determine whether a business is marital property?
- Was the business bought or started during the marriage?
- Were joint funds used to purchase or begin the business?
- What financial contributions were made to the business by the spouses?
- What labor or expertise contributions were made to the business by the spouses?
Once a business is determined to be marital property, the next step is assigning a value to the business.
Assigning a Value to a Business Is Complicated
Once the business is determined to be subject to equitable distribution, a valuation date must be set. Depending on the circumstances, the valuation date can be assigned as the date of the divorce filing or up to the start of mediation or trial.
Determining the value of any business interests includes the following:
- Reviewing the business’s legal entity (LLC, partnership, corporation, etc.)
- Value of product in inventory
- Equipment and other capital infrastructure
- Reviewing cash flow and other financials
- Debt, loans, and other liabilities carried by the business
- Any liens against the business
- Payroll and other expenses
- Considering patents, copyrights, and other proprietary assets
The value assigned to the business is considered like any other marital property, such as a home, cars, pensions, and other valuables.
Spouses sometimes agree on whether to continue or liquidate a business. There are even situations where former spouses remain business partners. A business can also be a significant point of contention.
When a divorce goes to trial, the judge has the authority to order the dissolution of the business. If the business was founded by one spouse and is their main source of income, liquidation is rarely ordered. The business-owning spouse will continue to run the business post-divorce and pay their ex their equity.
Industry Experts Evaluate a Business
At Samuelson Hause PLLC, we have access to resources that more accurately and effectively value a business. Appraisers, forensic accountants, real estate experts, and other professionals are essential when evaluating larger, more complicated businesses.
The experience of our attorneys and our team of subject matter authorities can also identify attempts by a spouse to undervalue a business or hide assets.
Legal Experience for Business Division in Divorce
Whether a business is yours, your spouse’s, or a joint endeavor, you need an attorney who understands the interplay between business and divorce. We have the legal know-how and practical experience to fight for the fair distribution of property, including any business interests.
Learn more about how your or your spouse’s business impacts divorce. Schedule a free consultation by calling (516) 584-4685.