When you’re already reeling from the emotional and financial fallout of the breakdown of your marriage, it can be daunting to face the prospect of trying to protect your business at the same time. However, the sooner you act, the more options may be available to you.
Separate vs. Marital Property
In New York, a business is viewed by the court as another asset that may be subject to equitable distribution of property during a divorce. The first determination that must be made during the divorce as it pertains to your business is whether that business is separate property – meaning it belongs to you as an individual and is not subject to equitable distribution – or marital property – meaning it belongs to you and your spouse together and is subject to equitable distribution during your divorce.
If the business was owned by you separately before the commencement of your marriage, your spouse was not involved in the business at all, and you did not use marital assets to support the business, then your business is likely still separate property.
However, if you started the business with your spouse, if your spouse became involved with the business during your marriage, or if you used marital assets to sustain the business, the business will likely be considered marital property.
Because New York is not a community property state, it doesn’t necessarily mean that the business will be divided 50/50. Instead, as an equitable distribution state, New York courts will have to decide how to divide all of your assets fairly, which can depend on many factors.
Protecting Your Business Before Divorce
Prenuptial or Postnuptial Agreement
While many people hesitate to put in place a prenuptial agreement before marriage, it is one of the best ways that business owners can shield their business from the financial fallout of divorce. A prenuptial agreement can set terms for the division of property in case the marriage ends in divorce and, in doing so, can clearly delineate an existing or even future business as separate property.
A postnuptial agreement entered into after the commencement of the marriage but before you file for divorce can similarly determine how a business is or is not divided if a couple does decide to divorce. It is critical that you have an experienced family law attorney help you draft any marital agreement that involves the ownership of a business to help ensure it will be upheld as a valid legal agreement if it is ever needed.
Let Your Spouse Go
If your spouse is involved in your business and you think your marriage is heading for divorce, it’s in your best interest to start separating your spouse from active involvement in your business. The less involved they are in the business, the easier it may be for your attorney to argue that they are not entitled to share in its profits. However, if they are actively managing aspects of the business and have been for a long time, it may be more difficult to make that argument.
Don’t Use Marital Assets to Support Your Business
The more intermingled your marital finances are with your business finances, the harder it will be to argue that your spouse is not entitled to a portion of the business’s value. Therefore, it’s best not to dip into marital funds to prop up your business, whenever possible. It’s also important to keep accurate and organized accounts of your business’s financials
Hire an Experienced Attorney to Help You Protect Your Business During a Divorce
Whether you believe your business may be separate property and you have taken steps before and during your marriage to help ensure that or not, it is critical that you hire an experienced high asset divorce lawyer to help protect your business.
If your business is determined to be marital property subject to equitable distribution, we can help you obtain an accurate appraisal of your business and help to ensure that your spouse cannot overinflate their contribution to the business. With over 100 years of combined legal experience, we have the knowledge to conduct the deft negotiations that may be necessary to protect your business.
At Samuelson Hause PLLC, we want to help you understand that you have choices during this process, and we can help determine the best strategy to move forward. If you are concerned about what will happen to your business during your divorce, contact us today online or call us at (516) 584-4685 to schedule a consultation.