If you and your spouse own a family business in Long Island, New York, and you are going through a divorce, you may be wondering how to divide the business assets and liabilities.
A family business is often one of the most valuable and complex marital properties that must be distributed in a divorce.
Here are some steps and factors to consider when dealing with a family business in a New York divorce.
Determine if the business is marital or separate property
The first step is to determine if the business is marital or separate property.
Marital property is earned or bought during the marriage. It does not matter whose name the property is in.
For the most part, separate property consists of assets and debts acquired by either spouse before the marriage. It can also include assets acquired by inheritance, gift or compensation for personal injuries during the marriage.
In New York, marital property is subject to equitable distribution, which means that the court will divide it fairly, but not necessarily equally, based on various factors. Separate property is not subject to equitable distribution and remains with the original owner.
The family business
A family business can be either marital or separate property, depending on when and how it was established and operated. For example, if one spouse started the business before the marriage and kept it separate from the marital finances, it may be considered separate property.
However, if the other spouse contributed to the business during the marriage, either financially or by providing labor or services, it may be considered marital property or at least increase the value of the marital property.
Evaluate the business
The next step is to evaluate the business, which means estimating its fair market value based on its assets, liabilities, income, expenses and future prospects. Valuing a family business can be challenging, especially if it is closely held or has intangible assets such as goodwill, reputation or customer loyalty.
There are different methods of valuing a family business, such as the income approach, the asset approach or the market approach. You may need to hire a professional business appraiser who can apply the appropriate method and provide a report.
You and your spouse may agree on a single appraiser to evaluate the business, or you can each hire your own appraiser and compare their results.