Getting a divorce can be an emotionally taxing process due to conflict between spouses and stress related to addressing and resolving financial issues and other concerns. The division of marital property is one of the most important factors in a divorce, and it can become especially complex for spouses who are business owners. By understanding the potential options for the division of business assets, divorcing spouses can make decisions that will protect their financial interests.
Marital Property Vs. Separate Property
When determining how business assets may be addressed during the divorce process, it will be necessary to understand whether a business is considered marital property. A business that a spouse owned before the couple got married will usually be considered separate property that is solely owned by that spouse. On the other hand, if either spouse founded or acquired a business after the couple got married, it will be a marital asset, and it will most likely need to be addressed during the property division process.
One of the first steps to take when addressing business assets in a New York divorce is to determine the value of the business. A business valuation will usually be necessary regardless of whether a business is marital property or separate property, since this will determine the financial resources that will be available to each spouse. There are several ways to value a business, including evaluating the business’s assets and liabilities, determining a potential purchase price based on recent sales of comparable businesses, or considering cash flow and profits to understand how the business’s value may increase in the future. It will often be necessary to work with financial experts such as accountants and appraisers to understand a business’s value.
Dividing Business Assets
When determining how ownership of a business will be handled, a couple may have several options, including:
Sell the business –
It may be necessary to sell a business to a new owner during the divorce process, and the spouses may then divide the proceeds earned from the sale. This can be a good option if neither spouse wishes to continue running the business or if an agreement on how to handle business ownership cannot be reached. However, selling a business may take time, particularly in certain markets, and it may not result in a desirable outcome for either party.
If one spouse wishes to be the sole owner of a business going forward, they may buy out the other spouse’s share of the business. A cash payment may be made, or marital assets may be divided in a way that will give the other spouse property that is equivalent in value to the business assets. This option may not be feasible if one spouse does not have the financial resources to buy out the other, although in some cases, a couple may agree to set up an ongoing payment plan.
Co-own the business –
If both spouses are committed to continuing the business and have the ability to work together, they may decide to maintain an ongoing partnership. However, this can be challenging, especially if there is a history of conflict between spouses or if they have different ideas about the future of the business. In order to make this option work, clear boundaries must be established, and a partnership agreement will usually need to be created to ensure that both spouses understand their ongoing roles and responsibilities.
Contact Our Rockland County Business Valuation Lawyer
Dividing business assets during a divorce can be a challenging process, and it is important to weigh the different options and determine the best approach to take. At Law Offices of Robert S. Lewis, P.C., our Hudson Vallue business asset division attorney can help you perform a business valuation and negotiate a settlement that will protect your financial interests in the future. Contact our office at 845-358-7100 to arrange a free consultation.