If you and your spouse are getting a divorce but co-own a family business, determining how to divide the company can feel daunting. To learn about your options and rights during this time, consult with an experienced Suffolk County business divorce lawyer to set up your free consultation today.
Is a Business Marital or Separate Property?
During divorce proceedings, all property owned by either spouse must be classified as either marital or separate. Marital property generally consists of any assets that were acquired during the marriage as well as individually owned property that the other spouse contributed to financially or otherwise. Separate property typically includes assets acquired by one spouse before the marriage, or gifts or inheritances specifically given to one party.
Only marital property is subject to equitable distribution in New York, so it is important to understand whether your business falls into this category. A business started by one spouse before the marriage may be considered separate property. However, it may have become marital property over time. For example, if the business grew substantially during the marriage, marital funds were used to support the company, or the other spouse contributed money, labor, or anything else to its success, the business will likely be considered jointly owned.
If it is a family business and was started during the marriage or by both spouses, it will likely automatically be considered marital property and be subject to property division.
How Can You Divide a Family Business in a Divorce?
The more assets a couple shares, the more complex property division becomes during a divorce. When spouses or a court are deciding how to divide a family business during a divorce, there are a few ways to go about it.
First, one spouse could buy the other out. This is one of the most common and simplest options, involving one spouse purchasing the other’s interest in the business. This ensures a clean break and equitable outcome for both parties.
The spouses can also agree to sell the business and split the proceeds from the sale. If neither spouse wants to retain ownership and responsibility for the business, this is a great way to go about its distribution.
Depending on the type of business, its history, and the relationship the spouses have, they could also continue to own and operate the business together. Nothing has to change, and they can both maintain their status as co-owners. However, this can be difficult, especially if the spouses have a volatile relationship.
One spouse could also agree to give up their share of the business in exchange for other assets during property distribution. This is similar to the buyout option, but instead of one spouse paying the other for their shares, they will simply forfeit other assets of equal value.
There are many ways to divide a family business during a divorce, and the best option will vary depending on the specific circumstances of the situation. For legal advice and representation, reach out to an experienced family lawyer today.
