Are you considering divorce and wondering whether you’re going to lose your business in the process? While a business may be subject to property division under New York family law, it’s important to understand that this doesn’t necessarily mean you will lose it.
New York is an equitable distribution state, which means that marital property, including businesses acquired during the marriage, is typically divided fairly but not necessarily equally between spouses upon divorce. If you litigate your divorce, the value of your business, and the contributions of both spouses to its acquisition and growth, will be carefully evaluated by the court.
Why would the business be subject to division in divorce?
If you owned a business during your marriage, it is likely to be considered marital property in New York for several reasons:
- If it was a joint investment, meaning both spouses contributed financially or through labor to establish or grow the business during the marriage, then it is likely to be considered marital property and subject to division in divorce under New York law.
- If personal and business finances were commingled such as using business income to support the family’s lifestyle or vice versa, it can blur the lines between personal and business assets, making it more likely to be considered marital property.
- If the business was treated as a shared asset during the marriage such as both spouses relying on its income for household expenses or if the business was operated from marital property like a jointly-owned home serving as its headquarters or workspace, it suggests an intention to transmute the business into the marital estate, making it susceptible to division.
There are negotiation options available that may allow you to retain ownership of the business while still achieving a fair and equitable distribution of marital assets.
Buyout agreement
You may consider negotiating a buyout agreement with your spouse, wherein you acquire their share of the business’s value in exchange for compensating them through a lump sum payment or structured installment plan. This arrangement allows you to maintain sole ownership and control of the business while providing your spouse with their fair share of the business’s worth.
Offsetting with other assets
If there are other marital assets of comparable value, you can negotiate to offset your spouse’s share of the business by offering them these assets instead. For example, you might agree to relinquish your interest in certain real estate properties, investments, retirement accounts or valuable personal property in exchange for retaining full ownership of the business.
Seeking legal guidance can help you understand your rights and options regarding your business during divorce proceedings. At The Law Firm of Poppe & Associates, PLLC, our focus is relentless advocacy for our clients. If you or someone you know is considering divorce, reach out to schedule a consultation at 646-665-3903 or by contacting us online.
Let Me Be Your Brave
Mia Poppe, Esq.
Managing Partner
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