No matter how you earn a living, divorce is a difficult financial, legal, and emotional process. But divorcing as a business owner presents distinctive challenges.
When someone’s business is involved in the divorce process, many complex factors must be considered. To better understand the unique challenges that divorcing business owners face, it is important to speak with a knowledgeable family law attorney.
Division of Property in New York
First, it is critical to understand the laws regarding the division of marital property in the state of New York. New York law follows an “equitable distribution” principle.
This means that marital property must be divided fairly. However, fair distribution is not the same as equal distribution.
This can be an especially challenging fact for divorcing business owners. The owned business may be classified as marital property.
In some instances, the company will need to be assessed by an accountant, usually a specialized valuation accountant, to determine its value. After the value of the business is calculated, the presiding judge will decide on an equitable way to divide it. The court will consider factors including:
- How long the marriage lasted
- Each spouse’s contribution to the company and the economic partnership
- The appreciation in the value of the business during the marriage
- The amount of spousal maintenance and other assets being distributed
When you are facing a division of your business, it is important to have a legal representative on your side. A seasoned family law attorney will work diligently to protect your rights and secure the assets that belong to you.
Maintaining Operational Continuity
If both partners help to run the business, a divorce can cause serious operational impacts on the company. When there is animosity between the spouses, this is even more likely.
It is important to prevent breaks in operational continuity caused by personal issues or disagreements. It can be helpful to have a logistical plan to ensure smooth business operations throughout the divorce process.
Business owners who are going through a divorce may face unique tax implications. For instance, suppose one spouse plans to buy out the other’s share of the company.
In cases like this, there could be significant tax implications for both parties. It is important to work with an attorney who understands the relevant New York statutes and regulations regarding the division of marital assets. This will help to minimize your tax liability and protect your property.
Handling Business Debt
The owning parties may also need to consider ways to handle business debts that were incurred during the marriage. It is important to accurately determine which party is responsible for the debt in question.
Usually, business debt is factored in when determining the value of the business. In some cases, both parties may be liable for the company debt. This could be true even if only one person was overseeing business operations. A skilled family law attorney can help you understand your financial responsibilities with regard to business debt.
Spousal Support Payments
When you are going through the process of divorce, it is important to consider the issue of spousal support payments. If one party plans to buy out the other’s share of the business, the judge may consider that fact when deciding appropriate spousal support.
Spousal support, also called “maintenance” in the state of New York, is meant to provide for the spouse who earns less income. This helps the lower-earning spouse maintain a reasonable standard of living.
The duration and amount of spousal support payments are determined based on the following:
- The duration of the marriage
- The income of each party
- Each spouse’s age and health
- The standard of living within the marriage
- Each spouse’s assets and liabilities
When a business is one of the assets to be divided, it is vital to have a legal professional represent you. To consult with a skilled family law attorney in Garden City, New York, contact Aiello & DiFalco today.