Rather obviously, getting a divorce is the toughest part of any marriage. Nobody imagines themselves getting a divorce when they said “I do,” however, unfortunately, it happens. The divorce process is stressful, to say the least, and when you are in a contested divorce, it can be even more taxing. Contested divorces very often fall into litigation, which means property you may consider yours is now up for grabs. The litigation process can be emotionally and financially draining, which is why so many couples seek to avoid it. However, when you or your spouse own a business, there is a very good chance your business could be subjected to the equitable distribution process as well. This is very concerning to most business owners, so if you think your business may be at stake, here are some of the questions you may have:
How is marital property different from exempt property?
In a contested divorce, marital property is generally subject to equitable distribution. However, exempt property can include various assets, predominantly the following:
- Gifted assets
- Inherited assets
- Assets obtained prior to marriage
- Assets that are decided as separate in a written agreement
What is valuation?
When you get a divorce, if your business falls under marital property, it may get divided equitably. If your business is determined marital property, financial experts will exhaustively analyze your business records to get a clear picture of how your marriage and business function financially. Courts may also inquire about your business practices and expenses, and if you fail to provide this information accurately and honestly, you may be subjected to an investigation conducted by the Internal Revenue Service.
How can I protect my business from a divorce?
Fortunately, there are a few ways in which you may protect your business from a divorce. First, if you and your spouse jointly own your business, you may draft a shareholder agreement. A shareholder agreement can value each party’s interest in the company, assign ownership in a divorce, and restrict transfer or ownership to someone else. Additionally, if you are not yet married, you and your spouse-to-be may draft a prenuptial agreement, which can address various business and marital concerns. However, if you are already married, you can no longer draft a prenuptial agreement. Fortunately, you may still draft a postnuptial agreement, which functions essentially the same as a prenuptial agreement, though it is drafted after your marriage is already official. If you are considering drafting any of the above agreements with your spouse, please do not hesitate to contact our experienced and compassionate firm.
Contact our New York firm
Peter V. Mandi, Esq. is an experienced divorce and family law attorney located in Bohemia, New York. If you require strong and dedicated legal representation in Long Island, New York, contact Peter V. Mandi & Associates, Inc. today.