In New York, your business may be subject to division if the court considers it as marital property. Marital property refers to any asset that you or your spouse gain during the marriage. This means that if you started your business during the marriage, it is marital property and, therefore, subject to division.
What if you started your business before marriage?
Any businesses or business interests acquired before the marriage are non-marital – or “separate” – property. Courts will not include these in the asset division unless you have used marital funds or assets to invest in the business. They may also consider non-financial or indirect contributions to the business as well.
For example, your ex-spouse may have stayed at home to support the household and raise the children. This may have allowed you to focus on sustaining or growing the business. In this case, the court may consider the business as partially marital property.
What happens if the court rules that my business is marital property?
If the court determines that your business is marital property, it means that the business will be subject to equitable distribution during the divorce proceedings. The court will first need to determine the value of the business. This often involves hiring financial analysts or business appraisers to assess the business’s worth. This may be based on the business’ assets, liabilities, income and market conditions.
After determining the business value, the court will then decide how to divide the business equitably between you and your ex-spouse. They look at a variety of factors, such as the contributions of each person, your future financial needs and other considerations outlined in New York’s equitable distribution laws.
Depending on the circumstances, several outcomes are possible:
- You may keep the business: However, you may need to compensate your ex-spouse for their share. This could involve a cash payout or giving up other assets.
- Sale of the business: In some cases, the court may order the sale of the business. They will then divide the proceeds between you and your ex-spouse.
- Co-ownership: Both you and your spouses might retain an interest in the business. This usually requires an agreement on management and profit-sharing.
Navigating the division of a business can be complex, requiring legal advice and financial planning to ensure a fair outcome. Consulting with an attorney can help protect your interests and facilitate negotiations.