Partner
As many as 10% of U.S. for-profit businesses are jointly owned by spouses. When these couples decide to divorce, their businesses often become wrapped up in the proceedings. How the court handles these valuable assets can affect other orders the court enters, including spousal support and property division.
Take a closer look at how shared assets are typically divided in a New York divorce.
How New York Businesses Are Treated in Divorce
When two spouses who are business partners separate, the court must determine whether the business and its assets are marital property. Marital property generally includes any tangible or intangible assets acquired during the marriage, regardless of which spouse acquired them.
Thus, a business you and your spouse start following your marriage may be wholly marital property. If you started your business before you and your spouse married, but the business acquired assets or increased in value during the marriage, those assets and added value may be considered marital property.
Any part of a joint business that the court determines to be marital property is subject to a property division order. New York courts seek to divide all marital property fairly and equitably between you and your former spouse.
3 Ways to Address a Joint Business
Knowing that at least some portion of your joint business will be considered marital property, it’s important to understand how these businesses can be addressed in a divorce under New York law. Three common ways to address a joint business include:
1. A Prenuptial or Postnuptial Agreement
Prenuptial agreements are an attractive choice for business owners who anticipate marrying in the near future to protect their businesses from being considered marital property.
A prenuptial agreement can exempt your business, as well as its present and future assets and growth, from being divided along with other marital property in the event of a divorce. If you created a prenuptial agreement with your former spouse before your marriage, a divorce lawyer can help to ensure it is enforced.
Some couples enter into such an agreement after marriage instead of before. It is also possible to achieve the same type of protection for your business as a prenuptial agreement through a postnuptial agreement.
However, just as a valid prenuptial agreement requires you to anticipate marrying your spouse in the immediate future, you cannot enter into a postnuptial agreement if you are already considering divorcing your partner.
2. A Property Settlement Agreement
If you have already filed for divorce, it is not too late to decide how to split your business. As a standalone agreement or a comprehensive property division plan, you and your spouse can agree on how your business and its assets should be divided.
This can allow you to keep your business intact and retain complete ownership of it. In return, your spouse may want a one-time payout or other assets.
3. Division by the Court
Without any agreement between you and your spouse, the court will find a way to divide the business and its assets fairly between the two of you.
Courts recognize that splitting ownership of a business after divorce can be problematic, so it may choose to award other marital property of similar value to your spouse in return for allowing you to keep your business and its assets.
When your business and its assets have a significant value, asset division alone may not satisfy the court’s priority of fair treatment for both spouses. The court may then order you to pay ongoing support to your ex.
The Role of a Garden City Family Law Attorney
No two divorces are alike, and divorces involving a jointly owned business can be especially complicated. A New York divorce lawyer from Aiello & DiFalco LLP can evaluate your unique circumstances and develop a customized strategy to protect your best interests going forward.
Contact us to schedule a consultation and discover how we can safeguard your future today.